BSP lifts bank rediscount rates anew

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) lifted anew the rediscount rates on loans extended to local banks to finance the expansion needs of businesses and households after delivering back-to-back policy rate hikes in May and June.

In a statement, the central bank said it raised the rediscount rates for loans under the peso rediscount facility to 4.0625 percent from 3.8125 percent for loans with maturity of up to 90 days and to 4.1250 percent from 3.875 percent for loans with maturity of up to 180 days.

The central bank delivered a second rate hike last June 20 as inflation expectations remained high with the risk of possible second-round effects from ongoing price pressures.

The central bank raised benchmark rates by 25 basis points, bringing the overnight reverse repurchase rate to 3.50 percent, the overnight deposit to three percent, and the overnight lending rate to four percent.

Last June 10, the BSP delivered its first rate increase in more than three years with a 25 basis point increase to curb additional inflationary pressures.

Rediscounting is a privilege of a qualified bank to obtain loans or advances from the BSP using the eligible papers of its borrowers as collaterals. It is a standing credit facility provided by the central bank to help banks liquefy their position by refinancing the loans they extend to their clients.

Over the past few years, the use of the central bank facility has been declining steadily as there is enough cash circulating in the economy.

Last year, the amount of rediscount loans plunged to P1.6 billion from a record P10.76 billion in 2016. In the first five months this year, rediscount loans reached P8.92 billion as a result of higher demand for corporate loans amid the massive infrastructure buildup by the government.

Out of the total amount disbursed under the peso rediscount facility from January to May, the central bank said the bulk or 56.11 percent went to capital asset expenditures, while 43.87 percent went to commercial credits.

On the other hand, a total of 6.49 percent went to services, 5.39 percent to permanent working capital, 0.06 percent to housing, and 0.02 percent to production credits.

The BSP adopted a unified rediscounting window for all types of banks in June last year as it terminated the sunset provision for small banks. It also shortened the maximum loan maturity to 180 days from 360 days.