Banks take advantage of September rediscount window

LENDERS borrowed in September on the central bank’s peso rediscount facility. – NB FILE PHOTO

LENDERS again used the central bank’s rediscount facility in September after leaving it intact in August amid improving credit demand.

Rediscount loans reached 6.12 million pesos at the end of September, the Bangko Sentral ng Pilipinas (BSP) said in a statement on Monday, exceeding the 5.52 million pesos observed between January and August. Cash in September alone was around 600,000 pesos.

Meanwhile, the Exporter Dollar-Yen Rediscount Facility (EDYRF) remained intact last month.

The BSP rediscount window allows banks to access additional money supply by depositing their collectibles with customers as collateral. In turn, banks can use the money – denominated in peso, dollars or yen – to extend more loans to their businesses or retail customers and make unexpected withdrawals.

Aside from September, banks only used the BSP rediscount facility this year in June and July.

Last year, rediscount loans fell 77.7 percent to 26.9 billion pesos from 2019 levels, as banks only borrowed at the BSP counter until March, April, August and September, while the EDYRF was not affected.

The marginal increase in rediscount loans reflects the improving but still lukewarm demand for credit amid the crisis, said chief economist at Rizal Commercial Banking Corp. Michael L. Ricafort.

“Loan demand may pick up in recent months but has remained relatively subdued as the pandemic has reduced demand conditions in the economy,” Ricafort said in a Viber message.

Bank credit recovered in August to record its first annual growth after eight consecutive months of decline, supported by an increase in producer credits and reflecting the transmission of rate cuts from the regulator in 2020.

The outstanding loans issued by major banks increased 1.3% year-on-year to 9.487 billion pesos in August, based on preliminary data released by the PASB. This is a turnaround from the 0.7% drop recorded in July.

Mr Ricafort said banks have less need to use BSP’s rediscount facility as there is always excess liquidity in the financial system.

The central bank freed some 2.2 trillion pesos of liquidity in the financial system through various easing measures. This is equivalent to about 12.1% of gross domestic product.

For this month, the BSP said the rates applicable to peso rediscount loans will be 2.5% regardless of their maturity.

At the same time, the rates for rediscount loans denominated in dollars and in yen, regardless of their maturity, are set at 2.13013% and 192083% respectively. – LWT Noble

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