Rediscounting loans surge 209% to P2.8B in January

MANILA, Philippines - Total rediscounting loan availments by banking institutions surged 209 percent in January after the Bangko Sentral ng Pilipinas (BSP) slashed interest rates to boost the economy.

The Bangko Sentral ng Pilipinas (BSP) reported yesterday that total availments under the central bank’s peso rediscount facility amounted to P2.79 billion last month or P1.89 billion lower than the P904 million in the same month last year.

 According to BSP data, 86.4 percent of the total rediscounting loans availed of by commercial, thrift, and rural banks last year went to commercial credits while 3.7 percent went to agriculture and industrial clients.

Futhermore, about 4.1 percent went to capital expenditures, 3.2 percent to other services, 2.5 percent to permanent working capital, and 0.1 percent to housing.

The BSP reported that aggregate availments under the US dollar facility of the exporters’ dollar and yen rediscounting facility fell 44 percent to $5.6 million in January from $10 million in the same month last year. The facility was offered by five commercial banks benefiting nine 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. Last year, total rediscounting loan availments by banking institutions plunged 45 percent to P27.37 billion from P49.76 billion in 2010.

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.

Last year, the BSP raised interest rates by 50 basis points as a preemptive move to keep inflation expectations well anchored amid rising global oil prices. This brought the overnight borrowing rate to 4.50 percent and the overnight lending rate to 6.50 percent.

It also raised the reserve requirement ratio for banks by a combined 200 basis points last June 16 and July 28 bringing the threshold to 21 percent from 19 percent to siphon off close to P70 billion from the financial system to curb additional inflationary pressures arising from excess liquidity from strong foreign capital inflows.