BARE MARGIN

Rotorua Morning Post, Volume 2, Issue 241, 1 June 1932, Page 5

BARE MARGIN

(Press. Assn.—

the bank rate VERY LITTLE PROFIT LEFT ON GOVERNMENT FINANCING INTEREST REDUGTJONS

-By Telegraph — Copyright).

| WELLINGTON, Tuesday. A statement issued to-day concerning bank interest rates, says that the following reduction has heen made by the Assoeiated Banks. The rates of , of interest allowed on fixed deposits j after May 31, will he as follows: On 1 deposits for any period between three I and six months, three per cent. ; heI tween six and 12" months, 3| per cent."; between 12 and 24 months 3i per cent. 24 months 4 per cent. The above reduction does not affect current fixed deposits^ The banks will continue to pay the higher rate borne by these deposits which will niature during the period up to 24 months.

For this reason it is necessary that there he some delay in reducing the interest rates on advancs. From August 31 next, suitable adjustments of the rates on advances one half per cent. will be made, and as a similar | reduction was made in November, 1931 this will make a reduction of one per cent. These reductions are being made for the purpose of co-operating with the Government in its legislation for a general reduction of interest rates and in view of other reductions made in necessitous cases such reductions will be considerahly greater than one per cent. A Bare Margin It will not he for 14 months yet that the full benefit of the proposed reduction on fixed deposit rates from August, 1931 will accrue to the banks. In addition to this, the Assoeiated Banks are financing the Government at a rate of interest which affords a bare margin jof profit. Attention is drawn to the faet that the minimum advance on the overdraft rate of six per eent. per annum and. five per cent. being payable on current 24 months' deposit until July 1933, there is a margin of one per cent. in respeet to the latter, as their total is considerable. This is reduced by the extent of the banks' income tax of rather more than 8/9 per cent. per annum on deposits and another 8/9 per cent. per annum on advances rising to 2/6 per cent per annum, and will barely leave any margin for profit on the sum so involved.