A few summary data on credits extended by the Bank for Agriculture and the Food Industry to collective farms have been released to the country's press in an obvious effort to publicize official concern for this important but neglected farm sector (see ch. 15). Information on other aspects of this bank's operations have not been disclosed.

The Savings and Loan Bank, an institution nationalized at an early stage of communist rule, had 1,560 branches and agencies in 1971, most of which were located in rural areas. The main function of the bank has been to mobilize the cash resources of the population for investment, through obligatory periodic transfers of deposited funds to the National Bank. In the 1966-70 period subsidiary functions of the bank gained in importance, including small-scale commercial bank transactions, personal loans, and tax collections. Receipts from personal savings deposits accounted for 70 percent of total cash receipts in 1970. Since the beginning of 1970 the bank has also made loans for private housing construction.

The schedule of payments to the National Bank has been sufficiently stringent to induce the Savings and Loan Bank to mount special educational programs for attracting savings, particularly in rural areas, and to seek ways of stimulating cash collections from its other activities. To this end the bank is giving special attention to finding more effective means for identifying cash reserves held by the population. One avenue the bank has been exploring is to gain greater knowledge of the timing of income receipts and of the uses to which incomes are put.

The volume of savings has been steadily mounting; it rose at an average annual rate of more than 20 percent in the 1966-70 period and was 2.5 times larger at the period's end than at its beginning. In 1970, 13.6 percent of the population's cash income was deposited in savings accounts, compared to 5.8 percent in 1960. More than 65 percent of the population's cash assets in 1970 were on deposit in savings accounts, as against 56.6 percent five years earlier. Under the economic plan for the 1971-75 period, savings deposits of the Savings and Loan Bank are scheduled to increase by 87 percent—the equivalent of an annual 13.4 percent growth rate. An important reason for the growth of savings has been a general shortage of consumer goods.

Loans granted by the Savings and Loan Bank for private housing construction in 1970 amounted to 2.1 billion lei. In 1971 the bank planned to provide construction loans totaling 2.9 billion lei. Information on other bank transactions has not been published.

Credit Policy

Interest rates do not reflect the scarcity of money or the element of risk. They are used by the government as one of the economic levers intended to motivate enterprises toward greater efficiency. In 1969 the average rate for short-term operating credits was 2.9 percent; actual rates ranged from less than 1 percent to a level far above the average. New regulations issued about mid-1970 raised the interest rates, established greater uniformity among them, and introduced a differentiation among penalty rates based on the length of time that repayments remain in arrears or credits in excess of those planned are used. As a result of these measures, National Bank officials expected the average rate of interest to rise to 3.8 percent.

A uniform interest rate of 5 percent was established on all operating credits for inventory and production purposes in economic sectors other than agriculture. Preferential rates for artisans' collectives were abolished on the grounds that the collectives had received enough state support in the past to place them on an equal footing with state enterprises with regard to credit. A rate of 3 percent was continued on credits used in the distribution of goods. Interest rates of 4 percent and 2 percent, respectively, were established for state and collective farms.

The government attaches great importance to the penalty feature of the credit system, which allows it to discriminate between efficient enterprises that find themselves in temporary difficulties and enterprises that are poorly managed. Enterprises that require operating funds in excess of those prescribed by officially determined norms or are unable to repay credits on time must pay progressively higher interest rates. Excess and overdue credits carry an interest rate of up to 10 percent for the first three months and up to 12 percent for the next three months. Enterprises in the second stage are subject to a searching examination by a committee of experts and may be denied further credits. Information is lacking on the procedures followed in the case of enterprises that would be declared bankrupt in a Western economy.

According to a National Bank official, the new credit regulations were to be rigorously applied in order to combat a rising trend in the volume of overdue credits that became apparent in the first half of 1970. The credit and interest policies were to be applied in a manner that would protect the economy from the bad effects of mismanagement and that would place the onus only on poorly run enterprises. This task was said to demand a high level of competence from those called upon to resolve the difficult problems of the enterprises.