BSP’s rediscounting loans hit P15.3 billion in 10 months

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has extended peso rediscount loans amounting to P15.3 billion to big banks from January to October to finance capital asset expenditures.

For October alone, the central bank extended P3.7 billion worth of rediscount loans.

Rediscounting is one of the credit facilities offered by the BSP to qualified banks with active rediscounting lines to meet their temporary liquidity needs by refinancing the loans they extend to their clients using the eligible papers of their end-user borrowers.

The eligible papers include credit instruments, such as promissory notes, drafts or bills of exchange of commercial credits, production credits, and other credits.

The applicable rediscount rate on loans under the peso rediscount facility was set at 5.6701 percent for loans with a loan maturity of up to 90 days and 6.5902 for 180 days for November.

According to the BSP, there was no availment under the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) during the 10-month period.

The peso rediscounting loans extended by the BSP plunged for the second straight year in 2021 amid the massive liquidity released by the central bank in the financial system through its COVID response measures.

Data released by the central bank showed total availments of banks against their rediscounting loans reached only P6.12 million for loans under the peso rediscount facility in 2021 compared to the previous year’s P26.9 billion.

The bulk or 65.35 percent of the total availments represented the rediscount of production credits, particularly for industrial processing, followed by other credits that funded capital asset expenditures with 24.81 percent, and permanent working capital with 9.84 percent.

The decline in rediscounting availments last year was attributed to the banks’ high liquidity position coupled by the deceleration of bank lending due to weaker corporate sector performance amid the global health crisis.

Despite the decline, banks continue to recognize the BSP’s rediscount facilities as a funding option should liquidity no longer be sourced from the market. About 50 banks maintain rediscounting lines with the BSP as part of their contingency funding plan.

After emerging as one of the most aggressive central banks in the world in 2020 and maintaining an accommodative stance, the BSP started raising interest rates on May 19.

To tame raising rates and stabilize the peso, the BSP has so far raised interest rates by 225 basis points, bringing the overnight reverse repurchase rate to 4.25 percent, the highest since the 4.50 percent in June 2019, from an all-time low of two percent.