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The fund, also known as Monies in Trust, is the vehicle used by the government to manage the collection and payment of child maintenance, as well as bail, court payments and fines, among other things.
Briefing Parliament's standing committee on public accounts, justice department acting chief financial officer Johan Johnson said the latest financial statements had made them realise just how much the banks were charging.
"(It) is the first time we've had a view (of this); we never knew how much we're paying for bank charges... We're heading into losses now because the bank charges are more than the interest," he told members.
It is understood the fund paid more than R27m in bank charges last year.
Speaking to reporters later on Tuesday, justice department director-general Nonkuleko Sindane said bank fees were "over the top".
According to a document tabled at the briefing, the TPF took in R2.87bn in 2010/11. Over the same period, it paid out R2.88bn. This involved 5.9 million receipt and 5.8 million payment transactions, done through 496 accounts at four major banks.
"On average, 250 000 maintenance payments to beneficiaries (are made) per month," it states.
The 496 accounts are held with Absa (130), FNB (187), Nedbank (five) and Standard Bank (174).
The document shows that during 2010/11, Absa paid out R12.3m in interest on the TPF monies that passed through the fund's 130 accounts with that institution. Over the same period, the bank charged R12.4m in interest on these transactions.
Standard Bank charged R6.9m on 174
accounts, and paid out R6.3m in interest.
Nedbank, where the TPF has only five accounts, charged R198 000 and paid out R113 000 in interest.
FNB was the only one of the four institutions where the interest paid (R8.5m) exceeded the banking charges (R8.1m).
Sindane said the TPF's use of the so-called "Big Four" banks was an historical legacy.
The department planned to start negotiations with them on "how much they are charging us and how much interest they are paying us.
"Indeed, the charges are over the top. Our view is that with that (amount) of investment and saving, we should be able to get a decent (interest) rate.
"Going forward, there are new entrants into the market that we might want to look at... The (existing banks) have served us very, very well, and we want to strengthen our relationship with them. But where there are other deals and possibilities, certainly... we will look at that."
Referring to the 496 bank accounts, Sindane said the department was trying to reduce this number.
"The administrative cost of those bank accounts is really a nightmare for us as a department."
Sindane said the TPF would achieve an unqualified audit for this financial year (2012/13), following the "historical clean-up" the department was now conducting.
"The end result for us is that this financial year... we are going to have an unqualified audit," she vowed.
The clean-up process would also see the department crack down "hard and strong" on cases of deliberate neglect, dereliction of duty, and theft or fraud.
Sindane made a call for more maintenance recipients to open bank accounts so they could receive their payments faster, through EFTs (electronic financial transactions). This would reduce cash transactions.
Johnson said the department was paying maintenance money directly into 217 000 bank accounts each month, out of a total of about 250 000 recipients.
"It would really assist us (to prevent) possible fraud and corruption if we could do this for more people," he said.
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