Rediscounting loans jump 64% to P16.6 B in 5 mos

MANILA, Philippines - Loans disbursed by the Bangko Sentral ng Pilipinas (BSP) to banks jumped 64.3 percent in the first five months of the year on the back of the strong demand for credit amid the stronger-than-expected economic growth in the first quarter of the year.

Total rediscounting loans availed of by banking institutions amounted to P16.6 billion from January to May this year or P6.5 billion higher than last year’s P10.1 billion.

The BSP through the peso resdiscount facility extends discounts, loans and advances to banking institutions in order to influence the volume of credit in the financial system.

Rediscounting is a standing credit facility provided by the BSP to help banks meet temporary liquidity needs by refinancing the loans they extend to their clients. The rediscounting facility allows a financial institution to borrow money from the BSP using promissory notes and other loan papers of its borrowers as collateral.

About 78.3 percent of the total rediscounting loans availed of by commercial, thrift, and rural banks in the first five months went to commercial credits while 3.5 percent went to agriculture and industrial clients.

Likewise, about 8.7 percent of the availments in the first five months went to other services followed by capital expenditures with 6.4 percent, permanent working capital with 2.9 percent, and housing with 0.2 percent.

The BSP reported that aggregate availments under the US dollar facility of the exporters’ dollar and yen rediscounting facility fell 21.5 percent to $66 million in January to May compared to $84.1 million in the same period last year.

The facility was offered by 10 commercial banks benefiting 27 exporters.

The BSP said there was no availment under the yen facility during the period.

Rediscounting is a standing credit facility provided by the BSP to help banks meet temporary liquidity needs by refinancing the loans they extend to their clients.

Monetary authorities use rediscounting loans as a monetary tool to regulate liquidity.

Last year, total rediscounting loan availments by banking institutions plunged 45 percent to P27.37 billion last year from P49.76 billion in 2010.

The BSP lowered its peso rediscount rate back to a record low of four percent per annum under its peso rediscount facility for all maturities effective March 5.

It has also pegged the rates for June at 0.23875 percent per annum under the EDYRF and 0.14429 percent per annum for its yen facility.

The country’s domestic output as measured by the gross domestic product (GDP) posted a stronger-than-expected growth of 6.4 percent in the first quarter beating the government forecast of 5.2 percent.

The Cabinet-level Development Budget Coordination Committee (DBCC) sees the country’s GDP growing at a faster rate of five percent to six percent after slackening to 3.9 percent last year from 7.6 percent in 2010 due to weak global trade and cautious government spending.