OVERDRAFT RATES.

Waikato Times, Volume 111, Issue 18625, 3 May 1932, Page 8

OVERDRAFT RATES.

POSITION OF AUSTRALIAN BANKS. FIXED DEPOSIT INTEREST. In their report to the Australian Premiers’ Conference the committee which was appointed to make a preliminary survey of the economic problem referred to the results following upon the passing of the financial emergency measures last year. Dealing with the trading banks, the committee said that there was no doubt how far the Acts applied to those institutions, hut the banks had reduced interest oh overdrafts by an average of about 14 per cent. That was in accordance with their agreement under the Premiers’ plan. Interest rates on fixed deposits had been reduced by about 25 per cent., but they applied only to deposits made since July, 1931, and would not be fully effective unfit two years from that date. “ it. Is difficult for the banks to make large reductions," said the committee, “ because they lend borrowed money. They must keep an adequate margin between the rates at which they borrow and lend if they are to remain solvent. ThP Incomes of shareholders have been heavily reduced. But Insofar as banks have not made the allround reduction of 1 per cent, as contemplated in the Premiers’ plan, they should be required to do so.” Melbourne bankers, commenting upon the committee’s report, said that while they were pleased to have the acknowledgment that they had reduced Interest on overdrafts in accordance with ‘their undertaking at the Premiers’ Conference, they could not understand the reason for the concluding sentence inferring that some bankers had not made the all-round reduction of i per cent. They claimed that they had fully carried out their undertaking. Some of them had made an automatic reduction of J per cent, in all customers’ overdraft accounts; others had averaged the reduction. it was explained that in these latter cases each account had been examined, and where the customer had been enjoying a lower overdraft rate than the average the reduction had not been to the full amount of 1 per cent. Other accounts which carried a higher rate were given the benefit of more than 1 per cent, reduction. In some banks which had given effect to the proposal In this way the general average reduction was as high as li per cent. In working out the general average reduction, one banker explained, no account had been taken of numerous instances where the customer hud been unable, owing to adverse circumstances, to pay any interest, at all. Interest in such cases had been waived altogether. “ It would be unfortunate, to say the least,’ he remarked “If any impression should bo created that the banks have not made their sacrifice. As a fact it has been a very substantial one.”