13 Mar 2009

Reserve Bank to discuss business terms with banks

8:15 am on 13 March 2009

they place on companies who want to borrow money.

The Reserve Bank is talking with retail banks about the restrictions

they place on companies who want to borrow money.

The bank on Thursday lowered the Official Cash Rate to 3%.

Some business groups say companies are finding it hard to get loans from banks and don't believe the cut will make a difference.

Reserve Bank Governor Dr Alan Bollard says the issue is not so much about interest rates and more about the terms and conditions that banks place on lending.

He told Morning Report he has heard that banks are placing strict terms and conditions and covenants on money lent to businesses.

Dr Bollard said the Reserve Bank is talking with retail banks about that.

The OCR was previously 3.5%. The reduction on Thursday was the sixth consecutive cut since July 2008 when the rate was 8.25%.

The new rate is the lowest since the OCR was introduced in March 1999, when it was set at 4.5%.