COMMERCIAL BANKS – CREDIT FACILITIES (No. B/547) Mr E. Guimbeau (First Member for Curepipe & Midlands) asked the

vice-Prime Minister, Minister of Finance and Economic Development whether, in regard to the

commercial banks operating in Mauritius, he will, for the benefit of the House, obtain from the

Bank of Mauritius, information as to if consideration will be given for ensuring that they cease

forthwith the practice of over-collateralizing whereby they insist on floating charges and other

guaranties far in excess of the credit facilities and other loans granted to the customers.

The vice-Prime Minister, Minister of Finance and Economic Development (Mr X. L.

Duval): Mr Deputy Speaker, Sir, I am informed by the Bank of Mauritius that it is presently

giving consideration to the terms  and conditions attached to the  grant of credit facilities by

banks.

In this context, as I mentioned before, a Task Force has been set up by the Bank on

Unfair Terms and Conditions in Banking and Related Financial Contracts, which proposes to

investigate into the terms and conditions of contracts, including fees, commissions and charges.

The issue of over-collateralizing will be addressed as part of this  exercise. The Bank has,

therefore, through a press communiqué, invited comments – perhaps the hon. Member would

like to make comments – from the general  public, including NGOs, welfare and consumer

associations as well as banking and real sector operators to contribute to this exercise; so it is

ongoing.

Mr Guimbeau:  Okay.  That’s good!   Mais,  M. le président, c’est important que le

ministre s’assure auprès de la Banque de Maurice afin que le montant des liens et autres floating

charges imposé par les banques commerciales à leurs clients sur des crédits découverts/emprunts

reflète la valeur de ces derniers.  Parce qu’aujourd’hui, si on prend un emprunt pour R 100,000,

on met des floating charges d’une valeur d’un million, which is very unfair, Mr Deputy Speaker,

Sir.

Mr Duval: In fact, Mr Deputy Speaker, Sir, obviously, value of any asset depends on

how you want to sell it.  If it’s on a normal sale basis, it may fetch its whole value, but, as we

know, if it is on a distress sale basis, sometimes it fetches 30% or so of the actual estimated value

sold otherwise.  So, that is one issue, but as I mentioned – because it’s a complicated issue – the

bank has set up this task force to look into it and the hon. Member can depone if he so wishes.   Mr Guimbeau: The hon. Minister is talking about 30%.  That’s okay.  But, that’s not the

case, Mr Deputy Speaker, Sir.  If you go to those banks in Mauritius today, it’s three to six times

the value.  This is what is unfair.

Mr Duval: I don’t know, Mr Deputy Speaker, Sir.  I am not dealing with the banks.

Mr Guimbeau: That’s what I am telling the hon. Minister: to see to it that this is not

done.

Mr Duval: Okay, Mr Deputy Speaker, Sir.

Sitting of tuesday 17th July 2012

(No. B/547)

Mr E. Guimbeau (First Member for Curepipe & Midlands) asked the vice-Prime Minister, Minister of Finance and Economic Development whether, in regard to the commercial banks operating in Mauritius, he will, for the benefit of the House, obtain from the

Bank of Mauritius, information as to if consideration will be given for ensuring that they cease forthwith the practice of over-collateralizing whereby they insist on floating charges and other guaranties far in excess of the credit facilities and other loans granted to the customers.

The vice-Prime Minister, Minister of Finance and Economic Development (Mr X. L. Duval): Mr Deputy Speaker, Sir, I am informed by the Bank of Mauritius that it is presently giving consideration to the terms  and conditions attached to the  grant of credit facilities by

banks.

In this context, as I mentioned before, a Task Force has been set up by the Bank on Unfair Terms and Conditions in Banking and Related Financial Contracts, which proposes to investigate into the terms and conditions of contracts, including fees, commissions and charges.

The issue of over-collateralizing will be addressed as part of this  exercise. The Bank has, therefore, through a press communiqué, invited comments – perhaps the hon. Member would like to make comments – from the general  public, including NGOs, welfare and consumer associations as well as banking and real sector operators to contribute to this exercise; so it is ongoing.

Mr Guimbeau: Okay.  That’s good!   Mais,  M. le président, c’est important que le ministre s’assure auprès de la Banque de Maurice afin que le montant des liens et autres floating charges imposé par les banques commerciales à leurs clients sur des crédits découverts/emprunts reflète la valeur de ces derniers.  Parce qu’aujourd’hui, si on prend un emprunt pour R 100,000, on met des floating charges d’une valeur d’un million, which is very unfair, Mr Deputy Speaker, Sir.

Mr Duval: In fact, Mr Deputy Speaker, Sir, obviously, value of any asset depends on how you want to sell it.  If it’s on a normal sale basis, it may fetch its whole value, but, as we know, if it is on a distress sale basis, sometimes it fetches 30% or so of the actual estimated value

sold otherwise.  So, that is one issue, but as I mentioned – because it’s a complicated issue – the bank has set up this task force to look into it and the hon. Member can depone if he so wishes.

Mr Guimbeau: The hon. Minister is talking about 30%.  That’s not fair. And when you go to those banks in Mauritius today, the guarantees asked is three to six times the value of the loan. This is also unfair.

Mr Duval: I don’t know, Mr Deputy Speaker, Sir.  I am not dealing with the banks.

Mr Guimbeau: That’s what I am telling the hon. Minister: to see to it that this is not done.

Mr Duval: Okay, Mr Deputy Speaker, Sir.