ercial and institutional channels in 1970.
According to preliminary data, savings deposits rose by 630 million leva
in 1972, and they were scheduled to increase further by 870 million leva
under the economic plan for 1973. The bulk of savings deposits has been
channeled into the budget.

The repayment record on loans by the State Savings Bank was excellent,
at least through 1969. The proportion of delinquent loans was reduced
from 3.1 percent in 1966 to 0.01 percent in 1969. This result was
achieved by a regulation that provided for penalties to be imposed on
paymasters throughout the economy who failed to withhold or to report to
the bank monthly loan payments. According to a bank official, there had
been no need to impose any penalties because the regulation itself
proved to be an adequate deterrent.

The loan repayment record of enterprises, trusts, and other economic
organizations has not been nearly so good and led to a tightening of
credit provisions in 1971. The proportion of overdue short-term loans in
the production sector increased from 10.7 percent in 1966 to 11.8
percent in 1971. Similar information on long-term loans has not been
published.

The penalty interest rate on delinquent loans is 10 percent (it was 8
percent through 1970), compared to a normal range of 1 to 5 percent on
loans for working capital. Whenever a bank loan or supplier credit is
delinquent for more than three months and the delinquent amount exceeds
20 percent of the borrower's working capital, the borrower becomes
subject to a special credit and repayment regime, the specific
conditions of which are not known. The ultimate sanction is the refusal
of credit and, at times, even the replacement of the trust or enterprise
director. The special credit regime is also applied whenever a trust or
its branch (enterprise) stockpiles unneeded inventories; procures
materials for production without guaranteed outlets for the output;
undertakes a construction program without adequate financial provisions;
increases its obligations; or suffers a worsening of its financial
condition for any other reason.

Interest costs in excess of those planned lower the economic
organization's income and, under the prevailing incentives system, also
reduce the funds available for the payment of wages, salaries, and
bonuses. Loan delinquency and the associated penalty interest rate,
therefore, often bring about the reduction or elimination of bonus
payments and,