RURAL CREDITS

Evening Post, Volume CXVI, Issue 131, 30 November 1933, Page 5

RURAL CREDITS

BOARD'S OPERATIONS

SATISFACTORY POSITION

YEAR OF DIFFICULTY

Satisfaction with the operations of the Rural Intermediate Credit Board is expressed in the annual report of the Commissioner (Mr. J. W. Maedonald) for the year ended June last which was presenteded to Parliament yesterday afternoon. In spite of the difficult economic position, the financial position of the board was sound. The report stated that most dairy farmers had based their expenditure for the year on an anticipated return of Is per pound for butterfat, whereas the return actually received was generally between 9d and lOd per pound. In these circumstances many applications had been made to the board for some measure of relief in the principal repayments required in the terms of the board's loans. Loans to sheep farmers had also required close supervision and control. It was fully recognised that loans on chattel securities called for close attention, even in times of normal prosperity, and the need of supervision had largely increased. At tho same time it was gratifying to report that in face of the existing conditions the majority of borrowers had mad.o their payments satisfactorily, and that the concessions granted had related almost exclusively to the principal pay ments, the amount of interest outstanding at June 30 last was only £000. THE BOARD'S POLICY. The board was continuing its policy of easing conditions for its borrowers as far as its duty to the debenture holders who had entrusted their, moneys to it would permit, and where concessions had been shown to be necessary and justifiable they tad been freely granted in cases where the board was satisfied with the borrower's conduct and the position of the security. "While the board has endeavoured to fulfil the intention of the Kural Intermediate Credit legislation that loans should, if possible, be fully repaid within a period of five years, it has recognised that under tho present abnormal conditions this ideal is not always attainable, and that some relaxation of the terms of the loans is necessary until the prices of primary produce improve," states the report. "It has consequently reduced substantially the annual repayments in a number of cases, although it has realised that this action will render it impossible to-clear tho full amounts of the loans within the five-year period. '•The policy of fixing tho annual repayments of principal has been fully reviewed in the light of existing conditions, and the board has also modified its original policy that where further advances are' granted to borrowers the additional amounts must bo cleared within the period of the original loan. Tho board is thus doing everything possible to sco that its borrowers are not unduly harassed in their financial operations and that they are allowed tho necessary funds for living-expenses and for the efficient working of their properties, though they aro, of course, required to see that expenditure is kept at as low a level as possible. A NEW RECORD. As evidence of'tho extent to which the board's operations have grown, it may bo stated that the total business which had been transacted up to June 30, 1933, or was then under consideration showed an increase of £74,328 over the total of £937,990 at June 30, 1932. For the first time since the board commenced its operations tho total business transacted or under consideration has; exceeded £1,000,000. When it is borne in mind that the average loans granted by the board are comparatively small, it will be seen that the figure quoted is an impressive one. "For the year en-ded June 30, 1932, loans paid out by tho board under all headings totalled £127,034, whereas the total for last year fell to £72,154, which was the • smallest amount paid out by the board in any complete year of its operations. The factors which have led to the decline of business were dealt with fully in the report for the year ended June 30, 1932, and it is an.necessary to refer to them in detail in this report; but briefly it may be stated that the reduction is principally attributable to ' the reluctance of many farmers to undertake fresh development or improvement of their properties, even for productive purposes, in view of the uncertainty whether tho prices obtainable for the additional produce would warrant the expenditure. GRANTING OF LOANS. "Other factors which have operated are tho cautious policy;adopted by ,the board in granting loans during the present period of unsettletriont, although no account was declined where tho applicant had a ; reasonable prospect of meeting his commitments, and the decision of the board to give preference to applications which would lead to increased production, and as a general rule and in tile absence of special circumstances to decline-applications having as their object tho liquidation of existing liabilities to- stock companies, banks, and other financial institutions. During the past year the board has found it possible to lift this restriction, and in view of this change of policy and the somewhat improved outlook for tho fanning industry an increase in the board's business may reasonably be anticipated. The supply of funds held is fully adequate to meet all demands likely to be made upon the board for assistance. "In response to the Government's expressed wish for a general reduction of interest-rates and with the. object of assisting borrowers, the board reduced tho rate of interest charged by it on. all classes of. loans. Hitherto the rate payable by farmers on all loans, whether made direct or through associations or under the discounting system, has been 6i per cent., the board lending to associations at 6 per cent, to enable them to obtain a profit interest of -i per cent, with which to meet their working-expenses. From May 1, 1933, the rate of interest charged to farmers was reduced by J per cent, .to 6 per cent., tho rato payable to tho board by associations being correspondingly reduced to 5J per cent. Th'o reduction involves a financial sacrifice on tho part of the board. The reduced rate of interest must be regarded as a very favourable one for loans on the classes of security which the board accepts, particularly when it is remembered that interest is computed on the daily balance and ceases to run on any amounts repaid."