Rediscount availments up two-fold in Jan-Oct
Credit to Author: Mayvelin U. Caraballo, TMT| Date: Mon, 11 Nov 2019 17:14:36 +0000
AVAILMENTS of the central bank’s peso rediscount facility rose by more than two times in the first 10 months of the year, which indicate that banks are lending more to clients, analysts said.
The Bangko Sentral ng Pilipinas (BSP) data showed on Monday availments reached P122.16 billion in January to October 2019, 158.9-percent higher than the P47.17 billion borrowed in the same period a year ago.
The bulk of it — 65.13 percent — were classified as other credits by the central bank. The loans were used for capital asset expenditures (38.75 percent), loans to other services (19.62 percent), permanent working capital (6.72 percent), and housing loans (0.04 percent).
The rest — 34.86 percent — were classified as commercial credits, with loans for importation taking up 24.93 percent, trading of goods accounting for 9.92 percent, and exports of goods or products with 0.01 percent.
“Meanwhile, production credits at 0.01 percent of total rediscounting loans pertain to bank loans for agricultural production,” the central bank said.
Rediscounting is a privilege given by the BSP to lenders qualified to obtain loans or advances using eligible borrowers’ papers as collateral.
Under the rediscount window, a bank wanting to liquidate outstanding client loans can run to the BSP to swap these for cash at a discount.
Through the rediscounting facility, the central bank said it also made possible the timely delivery of credit to all productive sectors of the economy. Rediscounting is one of monetary tools it uses to regulate the level of liquidity in the financial system.
In a comment, Union Bank of the Philippines chief economist Ruben Carlo Asuncion told The Manila Times the facility was established to help banks improve their deposit mobilization capacities and increase the utilization of other funding sources.
“With this double increase, this means that banks are lending more to their clients. This is a good indication that the financial system is healthy and working accordingly,” he said.
For his part, Rizal Commercial Banking Corp. economist Michael Ricafort said the increase “may reflect increased demand for peso funding, especially for shorter-term tenors, especially if there are new loans such as those for consumers, businesses and other institutions and for investments to be booked by banks.”
“Thus, banks get more peso funding in doing so in able to have greater flexibility to book more loans and other investments that provide higher interest rate returns and other income,” he noted.