BANK’S BOMBSHELL

Sun (Auckland), Volume I, Issue 143, 7 September 1927, Page 12

BANK’S BOMBSHELL

TE AROHA POWER BOARD OVERDRAFT PAYMENT DEMANDED (From Our Own Correspondent.J TE AROHA, Tuesday. At the monthly meeting of the Thames Valley Electric-Power Board at Te Aroha to-day, Mr. K. M Strange presiding, correspondence was read between the Bank of New Zealand and the board respecting the bank’s proposal to increase the rate of interest from 6i to 7 per cent. The bank pointed out that it had no power to charge more than 6J per cent, without the consent of the hoard. If the rate liad fallen, the hoard would have expected to receive the benefit of the reduction, and doubtless would have obtained it, and it was therefore reasonable to ask for the consent to increase the rate.

The board declined to accede to the request, when the bank fired a bombshell at the board by advising that it was compelled to demand from the board payment of the overdraft on the loan fund to date, amounting to £32,224 13s Id. Further, interest would accrue at the rate of £5 11s 3d a dav as from August ID. The chairman remarked that this meant that the money being obtained from the A.M.P. would be hypothecated to the extent of £5,000 per month until Christmas, to wipe out the overdraft, and to meet the somewhat peremptory and unexpected demands of the bank. The legal limit of the overdraft of the board was £ 60,000, and at the present time the overdraft stood in the vicinity of £25,000. This certainly upset the board’s arrangement, but it had sufficient money to protect full commitments. Tire hoard was absolutely independent of the bank, and considered its action drastic and unnecessary, for money had been raised for the purpose. After discussion it was agreed, or the niotion of Messrs. Corlett and Howie, that the Finance Committee report upon the matter of changing the hoard’s hanking account. It was further agreed to write to members of Parliament upon the subject.