CO129-555-6 Banking crisis 24-9-1935 - 18-10-1935 — Page 53

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This Section reads as follows:-

"A Credit Bank shall accept payment of the whole

outstanding loan or of any part thereof, not less than one-fourth of the original loan, before the date stipulated for payment, whether such repayment be made by the mortgagor or by a third party, subject to payment of a commission to the Bank which shall in no case exceed six calendar months interest on the sum so paid in advance. If the mortgagor gives three months' notice to the Bank of his intention to repay, the commission payable shall not exceed three "calendar months' interest" on the sum so repaid in addition to the interest accrued at the date of repayment."

55. It was argued that Credit Banks should be permitted

to bind by agreement the borrower to a minimum period of

five years during which he would not be able to repay the

whole or any part of the loan in excess of the instalment

laid down in his agreement, having regard to the fact that

a credit Bank must borrow in advance for reasonably long

periods and should not be faced with the possibility of its

money not being economically utilised. It was difficult to

lay down any specific minimum period during which a borrower

should be allowed to repay the whole or any part of his loan

in excess of the instalment agreed upon as such must depend

largely on the individual position of the Bank at the time

the borrower wants to repay his loan to the Credit Bank.

We think, however, that such period can properly be left to

the individual Credit Bank and that Section 4(ii) of the

Ordinance should be amended by the addition at the end of

the Section of the words "subject to any agreement to the

contrary".

56. The existing Companies Ordinance provides that no

debentures in series shall be issued without the approval of

the High Commissioner; and in the case of Credit Banks this

approval is usually given only if the request for the issue

of debentures will not bring the total amount of debentures

to more than five times the paid-up capital of the

Company.

It was pointed out that in Europe the rates

vary from 6 to 20 times the capital of the Credit Bank, and

that