INTEREST ON LOANS.

Hauraki Plains Gazette, Volume XXXVIII, Issue 5175, 7 September 1927, Page 2

INTEREST ON LOANS.

POSITION OF POWER. BOARD.

ACTION TAKEN BY BANK Something in the nature of a bombshell was received at yesterday’s meeting of the Thames Valley Electric Power Board when letters were received from the Te Aroha branch of the Bank of New Zealand With reference to the rate of interest to bs|* charged on the board’s loan, fund ac-

count. The bank pointed out that it haa no power to charge more than 6% per cent, without the consent of the board. If the rate had fallen, however the board would have expected to receive the benefit of the reduction and doubtless would have obtained it. It was, therefore, reasonable to ask for consent to increase the rate. In a subsequent letter the bank advise that it was compelled to demand from the board payment of the overdraft on the loan fund account, including interest to date amounting to £32,224 13s Id. Further interest would accrue at the- rate of £5 Ils 3d a day as from August 19. It ,was resolved to reply that the board, while realising the position of the bank, could not agree to any additional rate of interest on the A.M.P. Society loan money being paid. The chairman (Mr F. M. Strange) explained the method of dealing with the loan money, and said that he thought the action of the bank was a very drastic one. Repayments were being made at the rate of about £3009 a month. The position was) that it would take to December next to pay off the overdraft on the hypothecated debentures under the old arrangement. Money could be taken from the power fund, but that money, in turn, would have to be refunded. The board could carry on, but it would be placed at an inconvenience*. To Mr F. E. Flatt the chairman said that the ratepayers and consumers should be apprised of the action of the bank. It was indeed fortunate that the board should be in the strong position that it was. The thing was largely a matter of principle. It .was suggested by Mr H. M. Corbett that the board should change its bankers. The demand was not fair trading, and in view of the position that had arisen a change was desirable. Mr Flatt said it appeared that the Bank of New Zealand had preferred to side with the Associated Banks with regard to an increase in interest rather than honour a moral agreement with the board. “It is a strong argument in favour of a State bank,” interposed Mr J. Pohlen. Mr Flatt thought that for the board to change its bank would he an effective means of showing the Bank of New Zealand the board’s strong disapproval of its action. The chairman said it w.as possible that another bank could not give the accommodation that the Bank of New Zealand had given.

On the motion of Mr Corbett, seconded by Mr Willy, it was resolved to refer the matter to the special finance committee to bring down a report on the advisability of changing the bank of the board.

The following resolution, which was later submitted by the finance committee, was carried unanimously. “We recommend that the board protest to the Minister of Finance through members of Parliament of the Bank of New Zealand’s action with reference to increasing the rate of interest to seven per cent, on the hypothecation, and also to the calling up of the principal advanced; and that a copy of the protest be forwarded to the Bank of New Zealand.”