By Lee C. Chipongian
The central bank said it has released P10.61 billion worth of funds to banks under its peso rediscount facility as of end-July, way more than the P27 million it released in the same period last year.
The Bangko Sentral ng Pilipinas (BSP) does not disclose which banks have availed of the rediscounting facility. These funds are borrowed for banks’ liquidity requirements and they use it for new loans to other borrowers. In effect, the rediscounting cycle helps sustain the bank’s funds for relending to its borrowers and, at times, even to service withdrawals.
As of end-July, 51.71 percent of rediscounting loans were for commercial credits and these are distributed as: Imports (29.89 percent), trading (21.74 percent) and exports (0.08 percent).
About 48.27 percent went to “other credits” such as capital asset expenditures (37.11 percent), services (6.58 percent), permanent working capital (4.53 percent), and housing (0.05 percent). The rest went to production credits, said the BSP. The end-July rediscounting loan level was also higher than June’s P9.77 billion.
Last month, the BSP approved other alternatives for banks to comply with the Agri-Agra Reform Credit Act of 2009 (Republic Act 10000) including the investments in bonds issued by government banks for lending to the agriculture and agrarian reform sector, and rediscounting facility granted by big banks to other banks covering eligible agricultural and agrarian reform credits, including loans covered by guarantees of the Philippine Crop Insurance Corp.
Under the law, banks are mandated to set aside 25 percent of their loan portfolios for agriculture and fisheries. Ten percent of this portion is specifically for agrarian reform-related loans and the other 15 percent for farming sector.
The last major revisions to banks’ alternative compliance to the Agri-Agra law was in 2011 when the BSP listed the investments in housing and education/medical bonds and microbusinesses even if these are not agri-agra related, as allowable compliance.
Banks have notoriously poor compliance with the 25 percent credit requirement under the Agri-Agra law. Last year, BSP data show that banks only complied 12.83 percent with the required lending to the agriculture sector.