The primary purpose of the Bill is to increase the financial resources of the Agricultural Credit Corporation so that its work may continue and expand. The total amount of ACC loans at present outstanding exceeds £20 million. Lending by the corporation in its present financial year, which ends on 30th April, will total more than £5 million and it is expected that this volume of business will increase steadily in the years immediately ahead.
The Agricultural Credit Act, 1965, authorised share capital of £6 million for the corporation and increased to £20 million the borrowing powers of the corporation. The share capital has now been fully subscribed by the State and total borrowing by the corporation amounts to approximately £15 million. The Bill proposes to increase the authorised share capital limit to £10 million (section 2) and to extend the borrowing limit to £25 million (section 3). It is expected that the proposed new limits will suffice for at least five years ahead.
Section 4 proposes to extend the authority of the Minister for Finance to guarantee the corporation's borrowings to accord with the new borrowing limit. Under present arrangements for financing the corporation, the Exchequer will take up the new share capital and will also make repayable advances to meet the annual deficiency when the corporation's other sources of capital—repayments of earlier loans and borrowings from the public—have been tapped to the full. Last year the corporation remunerated its share capital at four per cent and paid interest at the full lending rate on its Exchequer borrowings.
There are a number of other provisions in the Bill which are intended to facilitate the ACC in its day-to-day administration. With the increase in its volume of business, the corporation is finding it increasingly difficult to have the annual accounts prepared, audited and furnished to the Minister for Finance for presentation to the Houses of the Oireachtas within ninety days after the end of the accounting year. It is proposed in section 5 to follow modern practice generally in this respect in relation to State-sponsored bodies by removing the specific time limit of 90 days and substituting a requirement that the accounts be submitted as soon as may be after the close of the year. Under this new provision the corporation will still be obliged to have the accounts prepared as early as possible.
Under present legislation, requests to a county registrar by the commercial banks and the ACC for information from the register of chattel mortgages must be made under seal. This procedure has at times proved to be a source of delay for the corporation and it is proposed in section 6 of the Bill that requisitions to a county registrar may be made under the hand of a solicitor or law agent of the corporation or a bank. The county registrar will continue to be the only person with direct access to the register of chattel mortgages. I understand that the banks do not register chattel mortgages to any extent.
Section 7 is a consequential provision to empower the ACC to make the amendments in their memorandum and articles of association which may be necessary to give effect to the provisions of the Bill.
The ACC offer a wide range of loan facilities designed to meet the productive needs of agriculture. While overall lending by the corporation has fallen off since 1965, due to the general suspension in the autumn of that year of loans for land purchase and the funding of bank debts because of the shortage of capital, there has been a steady increase in loans for directly productive purposes. The number of unsecured loans issued by the corporation to farmers is rising rapidly and the maximum amount of loan which may be issued under the corporation's scheme of unsecured loans is now £750.
The budgeted loan scheme, which has been in operation since the beginning of 1968, enables farmers to finance their seasonal needs as they arise by means of a book of dated cheques issued by the corporation; no security is required for loans of up to £1,000 under this scheme. Business with farming co-operative societies is growing steadily, and outstanding loans to these societies at present well exceed £½ million. More than 80 per cent of all loan applications received by the corporation are approved, and the repayments record of borrowers is excellent. Because of the continuing shortage of capital it will be necessary to maintain the present restrictions on loans for land purchase and debt funding as directly productive needs must have first claim. Any significant relaxation of these restrictions would give rise to considerable extra demand for Exchequer funds and add to the difficulties of financing the public capital programme.
However, the corporation continue to make loans available for the purchase of land to enlarge uneconomic holdings. During the past 12 months £150,000 was issued for this purpose.
An important development in the ACC's activities has been the setting up of area officers in provincial centres. These officers provide a closer link between the ACC and the farmer and they help by their advice to ensure that credit is used to best advantage by the borrowers. As the corporation's business grows, further extensions to the area-officer system are envisaged until the whole country is adequately catered for.
In recent years the ACC have raised a considerable amount of capital from the public through the operation of a deposits scheme and the issue of farm credit bonds. Both deposits and bonds are guaranteed by the State. The total of outstanding deposits and bonds at present amounts to approximately £6½ million. The corporation's efforts to finance as much as possible of its lending operations from non-Exchequer sources were not very successful during the past year because of the general increase in interest rates which resulted in stronger competition from other borrowing institutions for the public's savings. In order to maintain their competitive position the corporation revised their borrowing rates in January and again in April of this year. The interest rates on deposits now range up to 7¼ per cent subject to six months notice of withdrawal and the interest rate applicable to the latest series of bonds is 6¾ per cent with a tax-free capital bonus of 2 per cent where the bonds are held for five years.
The interest rate charged by the ACC on new loans issued is 8½ per cent which compares with the present bank overdraft rate of 9 per cent. However as a concession to the small farmer, the corporation have maintained an interest rate of only 6½ per cent on all loans made under their scheme of unsecured loans where the borrower's total indebtedness to the corporation including the new loan, does not exceed £400.
Loans in this category constitute approximately one-third of all loans issued by the corporation to individual farmers and the concession should therefore, be of significant benefit to the small farmer. The corporation's loan interest rates and hire purchase charges are kept at as low a level as possible in the interests of the farming community. Comparison with the rates of interest charged by agricultural credit institutions abroad is very difficult owing to the varying conditions relating to State assistance to agriculture in the different countries.
The primary objective of the ACC is to ensure that the development of Irish agriculture is not impeded by lack of capital. The corporation aim to be the most convenient and the cheapest possible source of credit for the farmer consistent with their operation as a commercial organisation. They issue loans for a wide variety of farming purposes on favourable terms as to interest and repayment and, in so far as they can, they seek to ensure that the money borrowed by the farmer is put to the best possible use. The present Bill is intended to enable the good work being carried out by the ACC to be continued and I confidently recommend it to the Seanad.