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Wednesday, 15 March 1961

Mr HAROLD HOLT - The honorable member seems to have misread the directive which has gone from the Reserve Bank to the trading banks. He has certainly misread the statement which I delivered to the House in November last. There was no suggestion then that overdrafts be " cleared up ", to use the somewhat loose phrase employed by the honorable member. The trading banks were asked to effect a substantial reduction in the level of their advances by the end of March. That was done because it was recognized that, in the tight liquidity situation in which the banks found themselves following a run-up of advances by something over £150,000,000 from January to October last year, if advances continued without restriction, the banks would not be in a position to meet the more urgent requirements of their customers in the June quarter of the year, the period of the year which is normally the one of most acute liquidity for the banks.

As far as I can ascertain, the banks are adhering broadly to the directive issued by the Reserve Bank and, having regard to the needs likely to be experienced in the June quarter, we see no occasion to vary that directive at the present time.

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