By Lee C. Chipongian
The central bank released P73.72 billion worth of rediscounting loans to banks in the first four months of 2019, significantly higher than the P7.65 billion borrowed same time last year.
The Bangko Sentral ng Pilipinas’ (BSP) Peso Rediscount Facility are borrowings against banks’ credits on transactions for commercial and “other credits”. It is one of the BSP’s standing credit facility and enable banks to liquidate and refinance loans using securities as collaterals. As a monetary tool, rediscounting is used for liquidity control.
As of end-April, “other credits” accounted for 64.91 percent of total rediscounting loans. These are broken down as: 49.76 percent bank loans for capital asset expenditures; 9.12 percent loans to other services; 5.96 percent permanent working capital; and 0.07 percent housing loans.
Commercial credits accounted for 35.09 percent as banks loans for: importation at 27.23 percent; and trading of goods or products at 7.86 percent.
The BSP’s rediscounting facility can be availed of by qualified banks with active rediscounting lines for their temporary liquidity requirements by refinancing the loans they extend to their clients using the eligible papers of its end-user borrowers.
Eligible papers include credit instruments such as promissory notes, drafts or bills of exchange. These can be used as commercial credits from the importation, exportation, purchase, sale, local transportation or storage of non-perishable and insured goods or products in Monetary Board-approved storage facilities; or production credit used for production or processing of agricultural, animal, mineral, or industrial products.
“Other credits” are special credit instruments such as but not limited to microfinance, housing loans, services, agricultural loans with long gestation period, and medium and long-term loans.
The central bank’s rediscounting line ranges from 50 percent to 200 percent of adjusted net worth depending on the total credit score of the applicant bank.
The temporary rediscounting line will not exceed 50 percent of adjusted net worth while a qualified bank may avail up to 100 percent of its rediscounting line.