DISPARITY IN RATES

Evening Post, Volume CXIV, Issue 119, 16 November 1932, Page 7

DISPARITY IN RATES

GOVEENitENT- & BANKS

OVERDRAFT CHARGES

The disparity between .the interest rates allowed by the banks on. daily Government balances and the rates charged on overdrafts is commented upon by the Auditor-General (Colonel G. F. C. Campbell) in his annual report which was presented to the House of 'Bepresentatives yesterday afternoon. "Under the agreement between tti» Government and the Bank of New Zealand the bank is required to allow-inter-est on • the total daily balances of all Government accounts at "Wellington (exclusive of accounts for funds . ppropriated for disbursement) at the rate'of-'2 per cent, up to £ 400,000, and at the rate of 1 per' cent, from £400,000 to £1,800,000, no interest being allowed on the aggregate balances held in excess of £1,800,000," states the report. '' During the greater portion of th'a year under review the Public. Trust office was working on a bank overdraft) and, for shorter periods, ihe Goverament Insurance Account was also overdrawn. Instead of the overdrafts on these accounts being'set off against 1 the larger credit balances in the other Government accounts, interest' was charged by the bank on the overdrafts at overdraft. iates. It does not' seem equitable that the Government should receive interest at a maximum rate of 2 per cent, oa the balances of certain. Government accounts • with•; the bank, i and at the same time be called upon to pay interest at as high a rate- as 16$ per cent, on Government accounts 'with the same bank which are overdrawn, when the. debit on the ovef- , drawn, accounts is much more than covjered by the credits on the other accounts.' . ■'"'."':.'

1 "It would appear that when-there !• an overdraft on some of the Government bank accounts, and credit balances in other Government bank accounts in excess of such overdraft, the one should be set off against'the other, and interest be allowed only on the net balance.- . .- - ' -■'- . .

"Some discussion has taken place between the Treasury and the Public Trustee on the question as to -whether the Treasury could not lend/to the Public Trust- at- a rate lower than- the usual overdraft rate' charged by the bank v and thus benefit both Departments. For .instance, during portion.' of: the. year .1931-32, the Public Trustee's overdraft afT the bank varied .up to £240,000, for which, he paid 6i per cent.,. while at the same time the Treasury had on fixed deposit at the same bank amounts varying from £1,000,000 to £200,000 for which it only received >2f to 3J per cent. It would, ofcourse, be impossible for the Treasnry to guarantee that it would be in a position to make advances to the Public Trustee whenever required by him, and it is also recognised, that in some cases not only is it more' convenient ■ but also possibly less costly, for the ■ Public Trustee to operate through the. bank, but the foregoing facts seem to indicate that when the Treasury is in a position .to place money on fixed deposit the Publis Trustee should have prior claim to it. It would seem that there .is room for co-operation between the Department in the matter."