THE Minister of State for Commerce, Science and Technology, Mr Pat Rabbitte, has agreed to withdraw a proposed restriction on the number of loans exceeding £30,000 which can be issued by an individual credit union.

The Minister told the Select Committee on Enterprise and Economic Strategy yesterday he would draft an amendment for the report stage that would allow for loans of over £30,000 where the loan did not exceed 1.5 per cent of the total assets of the credit union.

In the case of the largest credit unions in the State, this would allow loans of up to £1 million.

Mr Rabbitte said he would withdraw a restriction which directed that the aggregate amount of all loans over £30,060 could not exceed 5 per cent of the total loan book of an individual credit union.

Mr Rabbitte offered to withdraw the restriction after deputies from both Government and Opposition parties asked him to do so.

Earlier, introducing the amendment the Minister said that, of the 683,643 credit union members with loans, only 1,436 or 0.2 per cent had loans in excess of £20,000.

Only 276 members, or 0.04 per cent of borrowers, had loans as high or higher than £30,000. Nevertheless, he had decided to take account of these borrowers. "I've decided that some room must be provided for growth." Mr Rabbitte said he was particularly impressed by the argument that larger loans would allow members buy a local authority house.

The Minister's proposal was welcomed by Ms Ma inn Quill of the Progressive Democrats, but Mr Ned O'Keeffe of Fianna Fail, said there were strong arguments for not having any legislative cap at all. Mr Sean Power, of Fianna Fail said the cap was "totally unnecessary".

Mr Rabbitte said the credit unions were not "functioning in isolation". The Irish Bankers' Federation had been seeking to meet him for a couple of months. "I know they have their views and they are entitled to be taken into consideration. The only reason I haven't met them to date is because I have thought that this was a Bill for the credit union movement."

Having no ceiling on loans was not desirable. The credit union movement did not exist to extend loans to commercial enterprises or to make very large personal loans, he said.

He pointed out that, under the Bill, the Minister would be able to increase the financial limits by way of order.

The committee stage was completed yesterday and it is hoped the Bill will move to the report stage within two weeks. Mr Rabbitte and other speakers said they were anxious to have the Bill made law before the general election.

A submission to the committee from the Irish Bankers' Federation was yesterday circulated to members. The federation argued that credit unions should no longer be exempt from corporation tax and pointed out that the unions made a surplus of £62.5 million in 1991, the latest year for which figures are available. Given the growth rate of the movement, the 1996, surplus was likely to be £150 million.

The federation also argued that "an effective collection and policing system" be put in place to increase the amount of income tax paid by credit union members on receipts from their unions.

The federation further argued that the Minister's amendment allowing greater loans should be withdrawn, and that credit unions should be made subject to the Consumer Credit Directive when making advertisements.

Claims made by the federation were disputed by the Irish League of Credit Unions. Mr Rabbitte is expected to meet the federation today.