Interest Reductions by Banks

Manawatu Times, Volume LV, Issue 6836, 18 April 1932, Page 6

Interest Reductions by Banks

HALF PER CENT. ON OVERDRAFTS The chairman of the Associated Banks stated on Friday that the oanks propose to make a reduction in tho rate of interest on advances so as to bring the rate down on the average by j t p er cent,, with a minimum rato of 6 per cent. The proposed reduction will involve a reduction in deposit rates also, but until the Government has decided upon the reduction in deposit rates for Government. departments and others, in pursuance of the legislation now before Parliament, the alteration in tho bank deposit rates cannot be made, and the reduction of the bank overdraft rate will take effect throe months after tho alteration in the deposit rates. The reason for this is that the banks will continue to pay tho higher rates borne by current deposits for a period up to 24 months. Further, it will not do until July, 1933, that the full benefit of the previous reduction in fixed deposit rates made on August 3, 1931, will accrue to the banks. Attention is drawn to tho fact that with the minimum advance rate at 6 per annum being payable on current 24 months’ deposits until July, 1933, there is a margin of only 1 per cent, in respect of the latter (and this total is considerable); but this is reduced by the incidence of the banks’ income tax of rather more than 8s 9d per cent, on the deposits, and another 8s !)d per cent, on the advances, to below 2s fid.