More than 250,000 bank customers locked out of funds have faced financial hardship for over eight months. This crisis centres on Ithala SOC Limited, a state-owned financial institution in KwaZulu-Natal. Customers and employees alike remain caught between regulatory action, legal disputes, and the slow process of restoring access to savings.
According to reports by The Citizen, the South African Reserve Bank (SARB) froze Ithala’s deposit accounts in January 2025. Regulators acted after identifying severe operational and financial irregularities. While the intention was to protect depositors and prevent a bank run, the freeze has left thousands unable to access money for daily expenses.
Why Were Bank Customers Locked Out of Funds?
The root of the crisis lies in Ithala’s financial instability. SARB found that the bank was technically insolvent, with liabilities of about R2.79 billion and assets worth R2.35 billion. Over time, losses reached R520 million between 2008 and 2024, raising concerns about the bank’s long-term viability.
Ithala also operated under a special exemption from the Banks Act until 2023. Instead of restructuring, it continued mixing deposit-taking and credit-lending functions. This contravened regulatory requirements, forcing SARB to intervene.
In its statement, the regulator explained that freezing deposits was necessary “to prevent a disorderly collapse and protect customer interests.” While sound from a stability perspective, the decision created immediate hardship for individuals who relied on Ithala for everyday banking.
For official information on regulatory decisions, visit the South African Reserve Bank.
The Human Impact
Behind the numbers are ordinary South Africans struggling to survive without access to their own money. Customers report difficulty paying bills, covering school fees, and accessing pensions.
Ithala’s workforce has also suffered. More than 400 employees have faced months of unpaid wages, with salaries delivered only sporadically. Community frustration grew so severe that groups appealed directly to President Cyril Ramaphosa for urgent intervention.
For many families, the freeze represents more than lost income; it has eroded trust in financial institutions that were meant to support economic participation in disadvantaged communities.
Legal Battles and Court Intervention
The freeze has not gone unchallenged. In May 2025, the Pietermaritzburg High Court overturned SARB’s decision, ruling that depositors should be allowed access to their money. KwaZulu-Natal’s MEC for Economic Development, Musa Zondi, confirmed that systems would be restored with assistance from ABSA to manage transactions.
While this legal outcome offered some relief, implementation has been slow. Many customers are still waiting to see their accounts reactivated, with no clear timeline for when full access will resume. The uncertainty continues to fuel frustration and scepticism.
Why the Freeze Lasted So Long
Ordinarily, frozen accounts are reinstated within weeks. According to the Ombudsman for Banking Services, the typical timeframe for unfreezing personal accounts is one to two months. In business cases, it can take slightly longer, two to three months.
By this standard, Ithala’s eight-month freeze is extraordinary. Analysts point to the scale of the bank’s financial losses and the lack of clear restructuring as reasons for the delay. Regulators were cautious, prioritising an orderly outcome over immediate access. Unfortunately, this left ordinary South Africans paying the price for institutional mismanagement.
What Comes Next for Ithala and Its Customers?
The future of Ithala remains uncertain. Several possible outcomes are under consideration:
- Liquidation or restructuring to resolve insolvency.
- Government intervention to protect depositors and employees.
- System partnerships with commercial banks like ABSA to ensure smoother operations.
The crisis has also reignited debate about whether South Africa needs a deposit insurance scheme, similar to those in other countries. Such a mechanism could protect customers from losing savings during bank failures or freezes.
Lessons for Banking Customers
For depositors across South Africa, the Ithala case offers important lessons:
- Always verify whether a bank is fully licensed under the Banks Act.
- Be cautious with institutions operating under exemptions or special arrangements.
- Understand your rights through the Banking Ombudsman.
- Diversify financial holdings to avoid dependency on a single institution.
By staying informed, customers can better protect themselves from similar disruptions.
ALSO READ: Shocking Revelation: Nearly Half of South Africa’s Working Women Gamble Their Hard-Earned Money
Looking Ahead
The saga of over 250,000 bank customers locked out of funds for eight months highlights the fragile balance between financial regulation and customer protection. While SARB aimed to safeguard depositors, the lengthy freeze has inflicted significant social and economic pain.
As legal processes unfold and systems are restored, this case underscores the urgent need for stronger financial governance and transparent oversight. For customers, the experience is a stark reminder of the importance of banking awareness, legal recourse, and proactive consumer protection.