Banks are failing to provide all South Africans with a safe place to deposit their savings, the Department of Trade and Industry's Alistair Ruiters has charged.
In a stinging attack on the banks this week, Ruiters, who is chief director of Business Regulation and Consumer Services, said banks had tried to meet the challenge of international competition by focusing on the top end of the market.
This had meant a shift away from the provision of services to the lower end of the market.
Clients had been discouraged by closing branches, increasing over-the-counter fees and other service fees, and by making it hard to open accounts or to get credit. Access to credit and savings instruments was now "virtually impossible" even for people who earned a "decent living", Ruiters said.
Banks were falling down in three areas, he said: they were failing to provide a safe place for all South Africans to deposit savings, they were failing to provide a facility for receiving and transmitting income; and they were failing to provide access to credit.
"Most banks have minimum deposit requirements and also require proof of minimum income to open accounts. In some cases, banks have unilaterally closed accounts or have refused to open new accounts.
"We have received statements from some pensioners that banks have unilaterally closed accounts without even informing the client," Ruiters said.
"Banks are effectively limiting access to saving instruments."
One bank had even ended banking services to thousands of less profitable customers, he said.
A large section of the population had been left "unbanked", Ruiters said noting that though Post Bank, Pick n Pay Financial Services, Teba Cash, stokvels, credit unions and village banks did provide alternatives, only Post Bank and Teba Cash were significantly big and they were also the only ones to offer transmission accounts.
As banks rationalised and as consumers were forced to use automatic teller machines (ATMs) rather than bank branches, Ruiters said, banks were effectively exposing consumers to greater risks without accepting any liability.
"An ATM cannot be seen as a substitute for a branch office."
By closing branch offices the banks were further limiting access of low-income consumers to financial services.
At the same time, he charged, the banks were trying to make their services more profitable by raising fees.
"Bank user charges, as we all know, have increased dramatically over the last few years.
"Increases in user charges have become the fashionable way for banks to increase prices for services."