Banks tap rediscount window in September

LENDERS tapped the central bank’s rediscount facility again in September after leaving it untouched in August amid improved demand for credit.

Rediscount loans reached P6.12 million as of end-September, the Bangko Sentral ng Pilipinas (BSP) said in a statement on Monday, higher than the P5.52 million seen in the January to August period. Availments in September alone stood at about P600,000.

Meanwhile, the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) remained untouched last month.

The BSP’s rediscount window gives banks access to additional money supply by posting their collectibles from clients as collateral. In turn, banks may use the cash — denominated in peso, dollar or yen — to extend more loans to their corporate or retail clients and service unexpected withdrawals.

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

Last year, rediscount loans dropped 77.7% to P26.9 billion from the 2019 level as banks only borrowed from the BSP window in March, April, August and September, while the EDYRF was left untouched.

The marginal increase in rediscount loans reflects the improved but still tepid demand for credit amid the crisis, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

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

Bank lending recovered in August to register its first annual growth after eight straight months of decline, backed by a rise in production loans and reflecting the transmission of the regulator’s rate cuts in 2020.

Outstanding loans issued by big banks grew by 1.3% year on year to P9.487 trillion in August, based on preliminary data released by the BSP. This is a turnaround from the 0.7% decline in July.

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

The central bank has released some P2.2 trillion in liquidity into the financial system through various easing measures. This is equivalent to about 12.1% of gross domestic product.

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

Meanwhile, rates for the dollar and yen-denominated rediscount borrowings, regardless of maturity, are set at 2.13013% and 1.92083%, respectively. — L.W.T. Noble