Sitting of tuesday 3rd august 2010

(No. 1B/390)

Mr E. Guimbeau (First Member for Curepipe & Midlands) asked the vice-Prime Minister, Minister of Finance and Economic Development whether, in regard to the interest rates charged by the banks to the enterprises on loans and overdrafts, he will, for the benefit of the House, obtain from the Bank of Mauritius, information as to if it is proposed to take measures to -
(a) reduce same, and
(b) waive all the bank fees and charges in relation thereto.

The vice-Prime Minister, Minister of Finance and Economic Development (Mr P. Jugnauth): Mr Deputy Speaker, Sir, I am informed that the interest rate charged by banks on loans and overdrafts is linked to their respective prime lending rate, which in turn is adjusted to the changes in the key repo rate of the Bank of Mauritius. Therefore, the only way the lending rate can be directly influenced is through changes in the key repo rate.

The key repo rate of the Bank of Mauritius is determined by its Monetary Policy Committee (MPC). The MPC at its last meeting held on 22 June 2010 decided to leave the key repo rate unchanged at 5.75 percent. The next meeting of the MPC is scheduled to be held on 27 September 2010.

There are also other elements of cost and risk assessment which go into the determination of the interest rates charged by banks. These vary from one bank to another.

As regards part (b) of the question, it is not within the authority of Government to waive the bank fees and the charges. However, we are fully conscious of the difficulties of enterprises which have to face the impact of the euro crisis on their cash flow and we are working with all the parties concerned to find market conforming solutions.

Mr Bérenger: Mr Deputy Speaker, Sir, can I know whether there have been any changes recently in the composition of the Monetary Policy Committee?

Mr Jugnauth: As far as I know, I don’t think there has been any change.

Mr Guimbeau: Mr Deputy Speaker, Sir, is the hon. Minister aware that the banking sector and some banks are making billion of profits while many businesses are closing down due to abusive and excessive interest rates on loans and overdrafts?

Mr Jugnauth: Well, I am aware that banks have been making profits although some of them have said that they have been making less profit. There are also enterprises that are in difficulties, as I have just said, but I don’t know if the hon. Member is saying that we shall regulate the amount of interest that is charged. I think it is a very difficult and complex issue because, first of all, all the banks are not on the same footing. Also, there are different sectors concerned and all of them are not in the same situation. The policy of the banks, generally, is to charge different rates of interest to different enterprises operating in different sectors. I must say that we would all wish that the rate of interest is as low as possible. But, as I said, it is a very complex issue and we are looking at that also and we will see whatever decisions we can take in conformity with the operation of those banks.

Mr Uteem: Mr Deputy Speaker, Sir, in view of the euro crisis and the difficult economic times, would the hon. Minister consider setting up a committee together with banks to precisely see how there can be waivers of interests or a respite period given to borrowers where interest can be frozen to alleviate the hardship of the industries?

Mr Jugnauth: Mr Deputy Speaker, Sir, in the light of the euro crisis, in fact, I have already set up a technical committee, when I assumed office, comprising of JEC, Bank of Mauritius, technicians of my Ministry and technicians of other Ministries concerned also. I don’t think it would be proper to have another committee. That committee is also looking at different measures and as I have already announced, I will be coming shortly with a number of measures with regard to different sectors that are affected in the light of this exceptional situation.

Mr Bérenger: Mr Deputy Speaker, Sir, does the hon. Minister of Finance find it normal, in the spirit of the law, that in the days preceding the meetings of the Monetary Policy Committee, the Governor should canvass publicly his own views? For example, before the last meeting of the Monetary Policy, he canvassed for a rise in the LIBOR interest rate whereas a lot of people were suggesting that a small decrease should take place, he went on and on publicly, through the press and elsewhere, canvassing for an increase just before the Monetary Policy Committee was to meet.

Mr Jugnauth: Well, it is the Monetary Policy Committee that takes the decision with regard to the repo rate. The Governor has his views also, I don’t know whether he has canvassed, but I have taken note also that he has expressed his views prior to the holding of the Monetary Policy Committee. I understand, of course, that he will express his views in the committee, but it is the MPC that, at the end of the day, would assess the situation and take a decision.

Mr Guimbeau: M. le président, la démocratisation de l’économie est, avant tout, l’accès aux finances. Can I ask hon. Ms Nita Deerpalsing, hon. Cader Sayed-Hossen to see…

The Deputy Speaker: Can the hon. Member put his question, please?

Mr Guimbeau: …with the hon. Minister of Finance how he can regulate and, at least, come with some actions so that the interest rates on loans and overdrafts are brought down?

The Deputy Speaker: I don’t think it is a question. It is more a suggestion. We move to the next question.