Ithala Bank Faces Provisional Liquidation: Government Assures Protection for 257,000 Depositors

Image source

Ithala Bank, a government-owned institution primarily serving rural communities in KwaZulu-Natal, is facing potential closure after the Reserve Bank’s Prudential Authority filed for its provisional liquidation. The move, which was confirmed in documents submitted to the Pietermaritzburg High Court, marks a significant development for the bank, which has long been tasked with promoting economic development and empowerment in underserved areas.

The closure comes after Ithala Bank failed to meet a deadline in 2023 to regularise its deposit-taking activities, as mandated by the Prudential Authority. In response to growing concerns about the safety of retail depositors’ funds, the National Treasury issued a statement on 16 January assuring the public that all deposits will be protected under a government guarantee.

The statement further clarified that depositors’ accounts will be migrated to other banking institutions, ensuring that funds remain accessible during the liquidation process. The closure is expected to affect approximately 257,000 depositors.

Although Ithala Bank’s liquidation has stirred concern, particularly among the elderly and rural communities who rely on the bank for services like South African Social Security Agency (Sassa) grants, government officials are working to minimise the disruption. Johannes Kruger, appointed as the Repayment Administrator (RA) by the North Gauteng High Court in December 2023, is overseeing the repayment process.

Ithala’s CEO, Dr. Thulani Vilakazi, expressed concern over the bank’s closure, noting that it threatens around 400 jobs and could have a negative impact on vulnerable communities that depend on its services. He stated that the bank’s legal team would file an urgent interdict to challenge the appointment of the RA, while the bank’s KZN shareholder has engaged with Finance Minister Enoch Godongwana to seek a temporary solution.

While the closure process continues, authorities have reassured the public that their immediate priority is to protect the interests of depositors and ensure that their funds remain secure throughout the transition.