MSME loans for RRR compliance hit P200 billion

MANILA, Philippines — Loans extended by banks to micro, small, and medium enterprises (MSMEs) used as compliance with the reserve requirement ratio (RRR) breached P200 billion as of the week ending Oct. 31, according to the Bangko Sentral ng Pilipinas.

BSP Governor Benjamin Diokno said that the amount, which stood at P202.2 billion, accounted for a 13.6 percent share of the total required reserves as of the week ending Oct. 31.

The amount also represents a substantial increase from the P8.7 billion in MSME loans or 0.6 percent of total required reserves reported for the week ending April 2020 or since the BSP allowed peso-denominated loans to MSMEs as alternative compliance with the reserve requirement to incentivize lending.

The amount disbursed as of end-October was still within the cap imposed by the regulator on the amount of loans extended by banks used as alternative compliance to RRR set at P300 billion for MSMEs.

Once the set limits are reached prior to end- December 2022, the BSP can amend existing policy by closing the eligibility window on the use of the relief measure.

The regulator requires banks to keep a minimum amount of cash reserves with the BSP determined by the amount of deposit liabilities owed to customers.

The  Monetary Board slashed the RRR for universal and commercial banks by 200 basis points in March last year and for thrift as well as rural and cooperative banks by 100 basis points effective July 31, 2020 as part of measures to soften the impact of the pandemic on the economy.

“The BSP recognizes the crucial role of micro, small, and medium enterprises in the Philippine economy,” Diokno said.

According to the BSP chief, the BSP has deployed a wide range of policies and regulatory and relief measures to support MSMEs.

For one, the regulator has allowed the new peso-denominated loans to MSMEs and critically impacted large enterprises that do not belong to a conglomerate to be counted as compliance with the BSP’s reserve requirement.

Other prudential measures to assist MSMEs include the temporary reduction of the risk weights of loans granted to MSMEs in the regulatory capital treatment as well as the deferment of the implementation of the revised risk-based capital framework for banks to end-2022 from end-2021.

Likewise, Diokno said the period of relief on the reporting of past due and non-performing loans of borrowers affected by the pandemic was also extended up to the end of December instead of the original timeline of March 8.

“These policy issuances reinforce earlier pronouncements of the BSP that relax the know-your-customer requirements for retail clients to facilitate their access to formal financing channels,” he said.

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