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Talks ongoing with NBS over $15M ceiling application – Finance Minister
Government is in continuing discussion with the New Building Society (NBS) over an application to raise its lending ceiling.
Over the weekend, Finance Minister, Dr. Ashni Singh, said that the Ministry has indeed received an application for the ceiling to be hiked from $12 to $15M.
The statement did not immediately indicate when the application was made.
Dr. Ashni Singh
Recently, sources of that premier mortgage institution expressed concern over the application which they said remained in limbo for over three years.
According to the Minister, he has been in contact with the relevant stakeholders.
“The Ministry has, and maintains an open line of communication with NBS. It has enjoyed a professional working relationship with the society. Since the matter is pending and discussions are ongoing, it would be inappropriate and premature for my office to disclose the details of such.”
Dr. Singh said that NBS should “seek clarification” on the pending application.
“Since your publication cannot name the person who you claim speaks on behalf of the NBS, I am left to assume that this phantom character does not have the authority to represent NBS, but instead that this “source” aims to disrupt current talks between my Ministry and the Society for ulterior reasons.”
With a dramatic increase in lending in recent years because of a major housing drive, applications for mortgage financing have seen a sharp spike. The commercial banks and NBS have been reporting increased profits.
Homeowners themselves have been applying for more monies as costs continue to reach higher levels.
However, financial analysts have warned that it may have been a good thing that Government is delaying its decision as any increase in the limits for NBS will have tax and other implications. As a matter of fact, NBS, if it wants to operate like commercial banks, can apply for a banking licence which will allow them to lend up to any amount, local analysts said.
It was also pointed out that NBS enjoys full tax exemption and can therefore pay higher interest on deposits and charge lower interest on loans.
Under special arrangements, the interest earned on loans up to a maximum of $8M is exempt from taxes. This arrangement gives borrowers access to a greater number of lending agencies and therefore more choice.
“It is true that there is no statutory limit on the amounts which commercial banks can lend for housing purposes but once the loan is for more than $8M, the interest thereon is taxable. NBS can lend up to $12M and therefore has a competitive advantage of a margin of $4M,” one analyst told Kaieteur News.
Regarding the delay by the Finance Minister in rendering a decision, Kaieteur News was told that the Minister must no doubt consider the tax implications.
“If the increased limit is approved, the volume of the taxes which the Government would lose would be considerable. Borrowers would naturally prefer to borrow from the NBS with its lower lending rates than from the commercial banks. The more business is diverted from the commercial banks to the NBS, the greater the loss of revenue to the Government.
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