MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) reported yesterday that total rediscounting loan availments by banking institutions fell 80.5 percent in the first four months of the year as the central bank continued to tighten its monetary policy stance to keep inflation expectations well anchored amid rising global oil prices.
The central bank said total availments under the BSP’s Peso Resdiscount facility reached P8.01 billion from January to April this year or P33.1 billion lower than the P41.11 billion availed of in the same period last year.
Rediscounting is a standing credit facility provided by the BSP to help banks meet temporary liquidity needs by refinancing the loans they extend to their clients.
The BSP said 69.7 percent of the total rediscounting loans in the first four months of the year availed by commercial, thrift, and rural banks went to commercial credits while 7.5 percent went to agriculture and industrial clients. The data showed that 10.7 percent went to capital expenditures, 7.7 percent to other services, 2.9 percent to permanent working capital, 1.4 percent to housing, and 0.1 percent to microfinance.
Under the Exporters’ Dollar and Yen Rediscounting Facility, aggregate availments under the US dollar facility surged 59.4 percent to $65 million from January to April compared to $40.8 million in the same period last year. The facility was offered by seven commercial banks benefiting 19 exporters.
The BSP said there was no availment under the Yen Facility during the period.
Monetary authorities use rediscounting loans as a monetary tool to regulate liquidity.
As early as January last year, the BSP’s has lifted several liquidity-enhancing measures introduced starting November of 2008 in light of the strong economic recovery. In all, the BSP raised the rate on a short-term lending facility to four percent from 3.5 percent and reduced the peso rediscounting budget from P60 billion to P40 billion and further to P20 billion.
The central bank also restored the loan value of all eligible rediscounting papers to 80 percent from 90 percent of the borrowing bank’s credit instrument and at the same time revived the non-performing loan (NPL) ratio requirement of two percentage points from 10 percentage points above the latest available industry average NPL for banks wishing to avail of the rediscounting facility.
The BSP raised its Peso rediscount rate at 4.25 percent per annum under its Peso Rediscount facility for all maturities effective March 28. It has also pegged the rates for the month of May at 0.21025 percent per annum under the EDYRF and 0.14438 percent per annum for its Yen facility.
Last May 5, the BSP raised interest rates by 25 basis points as a preemptive move to keep inflation expectations well anchored amid rising global oil prices. This is the second straight policy rate setting meeting that monetary authorities raised interest rates bringing the overnight borrowing rate to 4.50 percent and the overnight lending rate to 6.50 percent.
The BSP slashed key policy rates by 200 basis points between December 2008 and July 2009 to cushion the impact of the global financial crisis on the domestic economy that brought overnight borrowing rate to a record low four percent and the overnight lending rate to six percent.