BPI: Agri-Agra Law pushes banks into unfamiliar territory

Bank of the Philippines (BPI) on Wednesday scored the Agri-Agra Law, saying that the 25-percent imposition of loan allocation for agriculture and agrarian reform beneficiaries is a harsh imposition. "The 25-percent loan allocation for agri-agra borrowers is too high. Mandatory lending is not the way to go," Aurelio Montinola III, president of BPI, said. Under the law, banks are compelled to set aside 10 percent of their loan portfolio for agrarian reform beneficiaries and another 15 percent for agriculture borrowers. Montinola said the law will only push banks into unfamiliar areas, effectively making the law "a moral hazard" rather than a moral beacon. But Montinola stressed that while the law is harsh, it is still the law. "I think as of this moment we just have to follow the law. The 25-percent mandatory allocation is high because it is not easy to lend that much [of one's portfolio]," he said. Also, Montinola said that as there had always been loan demand from the agriculture side of the allocation, the same cannot be said of the agrarian sector. —JE, GMANews.TV