INTEREST RATES

Dominion, Volume 25, Issue 168, 12 April 1932, Page 10

INTEREST RATES

Effect on Companies

REDUCTION BY LAW

Full Protection Needed

Considerable apprehension is being expressed by certain classes of business such as co-operative companies and affiliated financial companies, notably those operating in the dairy industry, on account of the Government’s proposal to effect an arbitrary reduction in interest rates as outlined in the National Expenditure Adjustment Bill. Representations on this question have already been made to the Ministry, for it is feared that certain companies will stiffer undue hardship if they are forced to comply with the legislation. Under the Bill a general reduction of 20 per cent, in interest rates is stipulated. As against this, however, it has been stated that the banks intend to bring down interest rates on advances from 64 per cent, to 6 per cent., a reduction of under 10 per cent, of the present rate charged. It is pointed out that certain co-oper-ative dairy companies have,advanced in the aggregate hundreds of thousands of pounds at a rate of interest roughly 2 per cent, above the ruling bank rate on advances, the difference being absorbed in administrative and other services. A compulsory reduction of 20 per cent., it is stated, would practically spell ruin for these companies, because it would bring their rate down to an unworkable level. The question was referred to the Prime Minister, Rt. Hon. G..W. Forbes, last evening, and he expressed . the opinion that there were sufficient safeguards in the section of the Bill dealing with interest and rent reductions to prevent any hardship. It was clearly stated, he said, that any mortgagee had the right to appeal against the arbitrary interest reduction on the grounds that the rate of interest payable under the contract was fair, taking into consideration the nature of the security, that adequate concessions had already been granted to the mortgagor and that the reduction of the rates of interest would cause hardship to the person entitled to -receive the interest. Mr. Forbes added' that there was little fear of the Bill being allowed to operate harshly person or firm. .