asked the Minister for Finance if he is aware that due to present bank regulations regarding overdraft accommodation, borrowers must take term loans and clear their overdraft for 30 days in each 12 months; and as the banks are now charging 15 per cent on term loans and intend to charge a further ½ per cent interest per month on term loans which are not redeemed when due if he will make a statement on the matter.
Ceisteanna—Questions. Oral Answers. - Bank Overdraft Accommodation.
116.
I am aware that, under the term lending system operated by the Associated Banks with the approval of the Central Bank overdraft accommodation is intended to cover short-term and seasonal needs for credit and the account must be maintained in credit for at least 30 days during the year. Financing needs for periods in excess of a year are covered by term loans which are negotiated for appropriate periods on agreed conditions. The rate of interest is related to the credit status of the borrower and the purpose and duration of the loan.
As regards the second part of the question, the Central Bank have informed me that they understand that, in the event of a serious breach of the conditions of a term loan or overdraft contract the banks may, subject to branch managers' discretion, charge a further ½ per cent per month with a view to ensuring that customers adhere to the terms of the accommodation. The customer has, however, the option of seeking to re-negotiate the loan for a longer period, at the appropriate interest rate.