Rural Bank cuts rates for commercial loans

Press, 9 July 1986, Page 44

Rural Bank cuts rates for commercial loans

PA Wellington

The Rural Bank has cut interest rates payable on its commercial loan finance.

Rates for new plant and machinery loans were cut last month and other new general purpose loans have now been reduced from 21 to 19 per cent. At the same time, the bank is advising most existing commercial borrowers of reductions in their interest rates, from August. General purpose loans which are now at rates of 21, 22 and 23 per cent will reduce to 20.5 per cent and plant and machinery

loans now at 24 per cent will reduce to 23 per cent. Other plant, machinery and general purpose loans remain unchanged. Mr Ray Chappell, general manager of the Rural Bank, said the reductions were not related to the Government’s rural support package. The reductions reflected the lower costs of raising money and were purely commercial moves to maintain competitiveness, he said. “However, the reduction in overhead charges should certainly give a helpful boost to the processing and servicing in-

dustries in the primary sector at the same time as the farmer is getting some support,” he said.

The Rural Bank was also a significant institutional lender to other business activities, other than farming, related to the primary sector and it was this commercial area that would particularly benefit from the lower interest rates. The Government decided last year that the bank should withdraw from providing new finance at concession rates but should lend within the primary sector in competition with other financial institutions.

It also ceased funding the bank’s activities on April 1 this year and the bank was now responsible for raising its own funds on wholesale and retail markets to lend to the primary sector. None of the proceeds from the bank’s wholesale and retail funding activities would be applied to the Government’s rural support programme. Mr Chappell said the bank was to be reimbursed by the Government for its participation in the aid programme, allowing it to proceed along its planned path to full State-owned enterprire status.