LOSS ON LOANS.

Star (Christchurch), Volume XLIV, Issue 456, 18 May 1932, Page 5

LOSS ON LOANS.

Position Facing Drainage Board. AN INTEREST ANOMALY. Due to the compulsory reduction cf interest rates, the Christchurch Drainage Board faces the prospect of a loss of a considerable sum of money on its advances for sewer connections. The board, at its meeting last night, referred the matter to its finance committee with power to make application to the Government tor exclusion of the board’s class of security from the operation of the Act.

Advice was received by the Boatd that interest payable on advances made for the installation of sewers would, under the National Expenditure Adjustment Act, 1932, be reduced from 0 per cent to 5 per cent from April 1. The Act did not apply to contracts entered into subsequent to April 1, 1932.

The net amount borrowed by the board for this purpose is £77,000, at rates varying from 51 to 55 per cent. These rates are subject to a reduction of 10 per cent, of which the board receives 9i per cent, the Government retaining the other one-half per cent as collection charges. The board has lent this money at 6 per cent, and now it has to be reduced to 5 per cent, representing a reduction of 16 2-3 per cent. This means that the board will save 9£ per cent on its borrowings, but will lose 16 2-3 per cent of the interest on its lendings.