Higher rates cut rediscounted borrowings by more than half

Banks cut their availments of rediscounted loans from the central bank by more than half from January to July, compared with a year ago, as a result of higher rates. The Bangko Sentral ng Pilipinas (BSP) reported yesterday rediscounted loans obtained by commercial, thrift, and rural banks reached P44.2 billion during the seven-month period, 59.1% lower than last year’s P108 billion. The end-July figure of P44.2 billion was also a marginal increase from the end-June figure of P43.3 billion. The decrease in availments followed the winding down of the rediscounting facility in line with the BSP’s “exit plan" from stimulus measures amid a global economic recovery. The rate for lending under the BSP’s rediscounting window was raised by 50 basis points to 4% last January, followed by cuts in the rediscounting budget which brought it back to the pre-crisis level of P20 billion. Of the total P44.2 billion in rediscounted loans, 55% went to commercial credits, 4.3% to agricultural and industrial credits, and 40.7% to other credits consisting of other services, capital expenditures, permanent working capital, housing, and microfinance, the central bank said. The total figure did not include P9 million in rediscounted loans granted to micro, small and medium enterprises affected by storms last year, it added. Meanwhile, loans under the export dollar facility for the seven-month period amounted to $57.1 million, benefitting 24 exporters. This was up by 54.3% from $37 million in the same period last year. The BSP’s export yen facility had no takers for the January to July period. Rediscounting is a special financing facility of the central bank in which a financial institution borrows money from the bank using promissory notes and other loan papers of its borrowers as collateral. The BSP has kept its overnight borrowing and lending rates at 4% and 6%, respectively, since July 2009 to help cushion the blows of the global financial crisis. With global recovery gaining momentum, the BSP has been pulling away measures earlier put in place to increase money in circulation in the financial system -- such as the expanded rediscounting window -- so as not to stoke inflation. The BSP has set the inflation target at 3.5% to 5.5% this year and 3% to 5% next year, forecasting inflation to reach 4% this year and 3% next year. -- Jose Bimbo F. Santos, BusinessWorld