THE MONEY MARKET.

Taranaki Daily News, 24 January 1921, Page 5

THE MONEY MARKET.

ADVANCE IN BANK RATES. INTEREST ON DEPOSITS. OVERDRAFTS AT 6| PER CENT. Some important changes .in rates for money were brought into operation by the associated banks last week. The rate for telegraphic transfers to London has been increased to 60s, compared with 50s, the rate fixed on December 8. The selling rates for drafts remain at the figures brought into operation on December 8: 37s 6d for demand drafts, 27s 6d for 30 days, 17s 6d for 60 days, 10s for 90 days, and par for 120 days. The first increase for some years has been made in the rates of interest for fixed deposits, the new rates in comparison with those previously ruling being as follow: Former Rate. New Rate. 3 months .... 3 6 months .... 2 34 12 months .... 34 4 ‘ 24 months .... 4 4J The minimum rate for overdrafts has been fixed at 64 per cent., and for discounts at 6 per cent., an increase of 4 per cent, in each case. The rise in the price of money, as indicated by the new bank rates, is expected to be followed by the building and lending companies (says a Wellington correspondent.) There has been a further advance of j per cent, in the rate of interest on bank overdrafts, which, for what may be described as absolutely gilt-edged advances, is now per cent., and the rate of discounts is raised to 6 per cent. The exchange buying and selling rates on London have also been revised, but the only alteration is in the telegraphic transfer rate.

The reason for the advance in the deposit rates and the stiffening of the rates on overdrafts is to be found in the growth of the advances made by the banks, as revealed in the bank returns for the quarter ended December 31. These showed that the excess of private deposits over advances was only two millions, compared with nearly twenty millions in the June quarter. Since last June the deposits have contracted, and the advances or overdrafts have greatly increased. This position has been brought about in a large part by the increased demands upon the banks for the financing of imports, which arrived (and are arriving) in far greater volume than was expected, and in many cases far sooner than was anticipated. 'fhen there have been advances by the banks to enable subscriptions to be made to the Government loan, to which subscription was compulsory, and further advances to producers, especially pastoralists. The sharp rise in the rate of interest on fixed deposits has attracted notice, especially as it indicates that the banks are endeavoring to obtain short-term money. It would seem possible that they may now be led to consider the payment of interest on current account balances, as Ts done in Britain.