Rediscount loans plunge in Jan-May
LOANS to banks extended by the Bangko Sentral ng Pilipinas (BSP) under its peso rediscount facility declined in the first five months of the year, with the bulk intended to be used for capital expenditures.
Central bank data showed on Wednesday that availments from January to May reached P20.70 billion, a 75.87-percent decrease from the P85.79 billion borrowed in the same period in 2019.
The bulk — 76.53 percent — were classified as other credits by the BSP. These loans were used for capital asset expenditures (62.66 percent) and permanent working capital (13.87 percent).
The rest — 23.47 percent — were classified as commercial credits, with loans for importation taking up 14.20 percent and trading of goods at 9.27 percent.
Rediscounting is a privilege given by the BSP to lenders qualified to obtain loans or advances using eligible borrowers’ papers as collateral.
Under the rediscount window, a bank wanting to liquidate outstanding client loans can run to the central bank to swap these for cash at a discount.
Through the rediscounting facility, the BSP has said it also made possible the timely delivery of credit to all productive sectors of the economy. Rediscounting is one of monetary tools it uses to regulate the level of liquidity in the financial system.
In a comment, Union Bank of the Philippines chief economist Ruben Carlo Asuncion said the latest data reflected banks’ sufficient liquidity.
“If there was a marked decline in the first five months of 2020, this may mean that banks are sufficiently liquid and are able to support liquidity requirements of their respective clients, as well,” Asuncion explained.
He said the latest rediscount loans figure “somehow compliments [the] fact that money supply has grown since last year, and that liquidity in the financial market amid the Covid-19 (coronavirus disease 2019) pandemic is apparently sufficient.”
Meanwhile, the central bank said the applicable rediscount rate for loans under the peso rediscount facility this month remained at 3.25 percent, regardless of loan maturity.
Last month, its policymaking Monetary Board extended the temporary reduction of the term spread on peso rediscounting loans relative to the overnight lending rate to zero until July 17. The latest action of monetary authorities is also subject to further extension, according to the BSP.