RURAL CREDITS

Evening Post, Volume CIV, Issue 68, 17 September 1927, Page 11

RURAL CREDITS

INTERMEDIATE LOANS

BILL BROUGHT DOWN

CHIEF PROVISIONS

The Bural Intermediate Credit Bill, whioh gives effect to further recommendations of the Bural Credits Commission than were given legislative form in the Rural Advances Ait of last session, was introduced by . Governor-General's Message in the House of Representatives yesterday afternoon.

Loans under the Bill are intended to bridge the gap between the short loans at present granted by banking and other financial institutions and longterm loans secured by way of mortgage of land. The TniTitnfflin term of any loan under the Bill is fixed at six months and the maximum at five years.

The Bill provides for the constitution of a Eural Intermediate Credit Board consisting of the Publio- Trustee and five other members to be appointed by the GovernoiKJeneraL At least one of these five members shall have had actual experience of farming. The Public Trustee is to be the principal executive member of the board, and is to be called the Commissioner of Bural Intermediate Credit. In addition to his deliberate vote the chairman of the board shall have a casting vote. The board may appoint supervisors, inspectors, and other officers for the efficient carrying out of its functions. "With the consent of the Public Service Commissioner or other proper authority, the board may utilise the services of any Department of State in the collection and payment of moneys, the issue and registration, of securities, or otherwise for the purpose of carrying out its duties. LOCAL COMMITTEES. Authority is conferred' on the board to establish local advisory committees consisting of not more than five members, and for the appointment of district intermediate credit supervisors. The local advisory committees trill work in association with the central board. The powers of the local advisory committees are thus defined: "An advisory committee shall advise upon matters submitted to it by the board, and may on behalf of the board perform such functions within the powers of the board as may from time to time be conferred upon it by the board. The functions of the central board are to provide funds for advances by way of loan:— (a) To associations specially- incorporated for the purposes of the Act; and (b) To co-operative companies (for example dairy companies established and carrying on business apart from the Act). The funds of the board are provided by grant from the Consolidated Fund (up to £250,000), and by moneys borrowed by the board on the security of debentures to be issued by it. The Bill provides for the incorporation of Intermediate Credit Associations. Every such association must consist of not less than twenty farmers. Each such association must be incorporated as a company under the Companies Act, and- every member is required to pay at least 20 per centum of the' nominal value of his shares. Tho function of the Association is to negotiate with the Rural Intermediate Credit Board for advances by way of loan to its shareholders. Every shareholder is required to give security (by way of promissory note or otherwise) for overy loan received by him, and such security is endorsed by tho association of which ho is a member. In addition to making advances to co-operative societies the board may carry on the business of discounting promissory notes or bills of exchange. The advances from the Consolidated Fund shall bo in amountß mutually agroed betwoen the Minister of Finance and tho board for a term not exceeding twenty years. Interest is not to bo chargod on any of these advances for tho first-ton years, but after that iutorost at 5 per cent, is payable. One moioty of Government advancos is to bo invested in Government sccurit\os and applied only to tho redemption of tho board's debentures. Tho Minister of Finance may, in liou of a cash advance, issuo Government socuritios. Tho Minister is also authorised to tako a preliminary advance of £5000 for the initial exponses of establishment, and the board itself may similarly help co-operative associations operating under tho schome to the extent of an advance not exceeding £25 for ono year. A further grant authorised from tho Consolidated Fund is not to exceed fi 10,000 for general administrative purposes. FINANCE OF THE SCHEME. Tho main financial resources are to bo provided by tho issuo of debentures with the concurrence of the Minister of Finance. The total of the debentures is not to exceed tho amount received from the Consolidated Fund, and not repaid, exclusive of amounts credited to tho Redemption Fund, plus the valuo of all mortgages, bills of sale, and other securities held by the board in tho course of it's business. All do? bentures shall constitute a floating chargo on the board's assets and shall have priority according to the date of issue. They may bo redeemed at par on specified dates not longer than five years from tho date of issue, and tho maximum rate of interest is to be 6 per cent. Debentures may bo converted into inscribed stock aud arc to be exempt from stamp duty. They will constitute a trusteo security. Doben-turo-holdcrs' rights are subject to several clauses. They arc entitled to petition tho Supremo Court for the appointment of a receiver if the board makos default in • interest, or if an audited balance-sheet for' any year discloses a loss on tho,board's operations exceeding 25 -per cent, on the total amount raised on debenture. If profits are made, ono half must be credited to tho Rural Intermediate Credit Redemption Fund and be applied to the redemption of debentures, and tho other half to the Reservo Fund for general liabilities. . CO-OPERATIVE CREDIT ASSOCIATIONS. Loans from the board to shareholders in Rural Credit Associations may be granted for the following purposes:— (a) _ Clearing, fencing, draining, and general improvement of lands in the occupation of tho applicant: (b) Erection of buildings;" (c) Purchase of implements, stock, seeds, plants, trees, and other things' in respect to the-occupation ii.icl use of land; (d) Payment of any mortgage, debt, or other liability incurred in niation to farming operations; (c) Any other purpose in relation to farming operations which max be approved by the board. The term of a loan may .be from six months to fivo years, and interest will bo limited to a maximum oc 7 per cent. Every such loan is scoured on livestock or other produce, tho property of the co-operative society, and must not exceed SO per centum! of the valuo of such security. An association which makes profits must first apply them to the provision of a reserve fund, and it may pay a

dividend not exceeding. 7 per cent, to shareholders if its incorporation expenses have been repaid. 1 Shareholders may be free of their obligations if 1 they surrender the full amount of the loan, and they may receive from the board such consideration for their shares as is agreed upon between the shareholder and the board. An association with fewer than twenty members will cease to exist. : Loans to co-operative societies can only be made to those with £2500 or more capital, and at least thirty shareholders. The term is limited to three years at a rate of interest of not more than 1 per cent, in excess of the rate paid on the board's debentures. General clauses provide for an annual report to the Minister of Finance, who will present it to Parliament. The books of associations and co-operative societies indebted to the board are to be open to full inspection. c Every person who obstructs the board's officers in the exercise of their .powers will be subject to a fine of When the Bill was introduced the Prime Minister stated that in regard to the financial provisions the Government had other proposals' and the Bill could be amended in committee. BASIS OF SCHEME. The Leader of the Opposition (Mi H. E. Holland): "Will the basis be the same as for the rural"credits; that is, that the loans will nqt be part of >he Public Debt?" Mr. Coates: "Yes." The Bill was read a first time.