BANK ADVANCES

Dominion, Volume 25, Issue 167, 11 April 1932, Page 8

BANK ADVANCES

Reduction in the Rate , Expected

ONE-HALF PER CENT.

A statement will be made in the near future by the chairman of the Associated Banks on the»question of bank rates for advances, which it is understood will be reduced by. one-half per cent.

An intimation that, the banks would set. out their attitude on this question was given by the Minister of Finance, Hon. W. Downie Stewart, in his statement in the House on Thursday evening. He said that in order to preserve the existing relative position and ensure that the reduction in fixed charges was an all-round one, it was necessary to consider the position of bank rates and bank deposits generally. The question had been discussed with the banks and it was understood that they would make a statement shortly on rates for advances.

' In accordance with tEe decision of the associated banks in New Zealand, announced at the end of July, the minimum rate of interest on advances was reduced from 7 to 6J per cent, as from November 1, 1931. The rates of interest allowed by the banks on fixed deposits lodged on and after August 1, 1931, were reduced by i per cent, on 24 months deposits and i per cent, for shorter periods. In announcing the reductions, the official statement issued by the banks on July 28 said: “From November 1 next suitable adjustments of rates will be made and on that date'] a minimum rate of 6J' per cent, will come into operation." The usual practice of the banks is to alter the rates of interest in accordance with the movements in aggregate deposits and advances, as affected by the law of supply and demand. On this occasion a departure from practice has been made for the purpose of cooperating .with the Prime Minister’s negotiations for a general voluntary arrangement designed to bring about a cheapening of the price of money. “The reduction of rates of interest now announced will, of. course, not affect current fixed deposits. The banks will continue to pay the higher rates borne by those deposits for a period up to 24 months. For this reason it is necessary, in the unusual circumstances, that there should be some delay in reducing rates of interest on advances.”

The minimdm overdraft rate was increased from 6} per cent, to 7 per cent, on February 1, 1930. on which date the rates of interest paid by the banks on fixed deposits were increased to 35 per cent, for three to twelve months, 41 per cent, for periods between 12 ami 24 months, and 5 per cent, for 24 months and over. On April 22, 1930, the deposit rates were adjusted by making that for six months and under 12 months 4 per cent. The banking averages for the quarter ended March 31, 1932. disclosed deposits in excess of advances by £1,232,744, this contrasting with £3,080,303 preponderance of advances over deposits a year ago. .