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Tuesday, 17 November 1964

Senator HENTY - On 3rd September, Senator Wright addressed to the Minister then representing the Treasurer a question without notice in which he referred to the possible introduction by the trading banks of a fee on unused overdraft limits. As promised at the time, the honorable senator's question was brought to the Treasurer's notice. The Treasurer has now provided the following information: -

Some margin between borrowers' overdraft limits and their actual indebtedness to banks at any time is a characteristic of the overdraft system and in the aggregate this margin is normally substantial. At the present time total overdraft limits exceed £1,900 million but the amount currently drawn is only about £1,100 million.

The whole matter of the volume of unused overdraft limits is prominently in the minds of the trading banks and the monetary authorities. It is a matter of concern to the trading banks themselves because of the need to provide for demands on their liquid resources in the event of a sudden rise in the extent to which limits are used. I understand that there has been some discussion in banking circles of the question of introducing a charge on undrawn limits, but I am informed that there are no proposals currently before the Reserve Bank in this connection. The Reserve Bank has, however, encouraged the banks to keep their unused limits under careful review and, as recently announced by the Governor of the Reserve Bank, the banks have been requested to exercise restraint over their new lending and to avoid as far as practicable further increases in overdraft limits outstanding.

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