8.—14.

While the Board has endeavoured to fulfil the intention of the Rural Intermediate Credit legislation that loans should, if possible, be fully repaid within a period of five years, it has recognized that under the 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. It has consequently reduced substantially the annual repayments in a number of cases, although it has realized that this action will render it impossible to clear the full amounts of the loans within the five-year period. 4. As will be seen at a later stage of this report, the policy of fixing the 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 be cleared within the period of the original loan. The Board is thus doing everything possible to see that its borrowers are not unduly harassed in their financial operations and that they are allowed the necessary funds for livingexpenses and for the efficient working of their pjoperties, though they are, of course, required to see that expenditure is kept at as low a level as possible. 5. As evidence of the extent to which the Board's operations have grown, it may be stated that the total business which had been transacted up to the 30th June, 1933, or was then under consideration through rural intermediate credit associations under Part II of the Act, by the granting of loans direct to farmers under Part 111 of the Act, and by the discounting of promissory notes, showed an increase of £74,328 over the total of £937,999 at the 30th June, 1932. For the first time since the Board commenced its operations the 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. 6. For the year ended 30th June, 1932, loans paid out by the 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 30th June, 1932, and it is unnecessary 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 the prices obtainable for the additional produce would warrant the expenditure. Other factors which have operated are the cautious policy adopted by the Board in granting loans during the present period of unsettlement, although no account was declined where the 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 the absence of special circumstances to decline applications having as their object the 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 the farming 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. 7. 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 the 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 6| per cent., the Board lending to associations at 6 per cent, to enable them to obtain a profit interest of J per cent, with which to meet their working-expenses. From the Ist May, 1933, the rate of interest charged to farmers was reduced by J per cent, to 6 per cent., the rate payable to the Board by associations being correspondingly reduced to 5J- per cent. The reduction involves a financial sacrifice on the 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.

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