Deposits in banking sector grow to Shs31 trillion

Deposits in the banking sector grew by 14.8 percent from Shs27 trillion as of 30 June, 2020 to Shs31 trillion for the year ended June, 2021, according to the Deposit Protection Fund.

Out of these, Shs5.8 trillion, which represents at least 18.6 percent, were protected, which is above the 10 percent benchmark put in place by the East African Monetary Affairs Committee.

The Deposit Protection Fund provides deposit insurance to customers of deposit-taking institutions licensed by Bank of Uganda.

Membership, which currently stands at 34 members, is compulsory for all deposit-taking institutions.

In details contained in its performance report, the Deposit Protection Fund also indicated that bank accounts had grown from Shs16.7 million as of June 2020, to Shs19.1 million for the period ended June 2021, reflecting growing confidence in the banking sector.

Of the Shs19.1 million accounts, the Deposit Protection Fund noted approximately 98 percent had balances of Shs10m and below.

This, it was noted, was well above the 90 percent benchmark set by the East African Monetary Affairs Committee while the fund size increased to Shs966b as of June 30, 2021 from Shs787b as of June 2020, thus registering a 22.7 percent increase. 

The size means that at 16.7 percent of total protected deposits, which is slightly below the 20 percent benchmark recommended by the East African Monetary Affairs Committee can be paid in the event of any eventuality.

Mr Ben Patrick Kagoro, the Deposit Protection Fund chairman, said despite a challenging operating environment orchestrated by Covid-19, total assets of the banking sector increased by 10.9 percent from Shs35.8 trillion as of June 2020 to Shs39.7 trillion for the period ended June 2021.

The growth, he said, was mainly due to increased holding in government securities, which rose by 31.2 percent to Shs10.1 trillion as well as gross loans and advances that increased by 7 percent to Shs16.6 trillion.

Mr Kagoro also noted that during the period, all commercial banks were adequately capitalised with aggregate industry total capital to risk weighted assets ratio and core capital to risk weighted assets ratios at standing at 22.8 percent and 21.4 percent, respectively.

In addition, he noted, the banking industry maintained adequate liquidity buffers, with the ratio of liquid assets to deposits standing at 51.5 percent as of June 2021, well above the regulatory minimum of 20 percent.

Reform   

According to Mr Kagoro, the banking industry maintained adequate liquidity buffers, with the ratio of liquid assets to deposits standing at 51.5 percent as of June 2021, well above the regulatory minimum of 20 percent.