The Association described the decision as reckless and devastating, accusing the Prudential Authority of disregarding Ithala's role in serving marginalised communities in the KwaZulu-Natal (KZN) province.

The Prudential Authority stated on Thursday that despite being referred to as a bank, Ithala was never granted a banking licence. However, the finance minister had given Ithala an exemption, allowing the entity to accept deposits until it stabilised its operations, which lapsed in December 2023.

PSA Provincial Manager, Mlungisi Ndlovu, expressed strong opposition to the Prudential Authority's application for provisional liquidation of Ithala.

"As PSA in KZN, we are very opposed to the Prudential Authority's application for provisional liquidation of Ithala. This action will obviously jeopardise the financial security of over 270 000 depositors, threaten the livelihoods of numerous employees, and endanger the economic stability of KZN. We believe that the SARB should have provided assistance because some of the technicalities that prevented this bank from operating on an exemption are due to the Bank Act, which really prevents a provincial entity from being granted a licence," Ndlovu said.

--SABC/ChannelAfrica--