Since banks are still very liquid, the central bank released only P6.12 million of mostly agri-related rediscounting loans as of end-September this year, substantially lower than the P26.9 billion same period in 2020.
The Bangko Sentral ng Pilipinas (BSP) said there are 16 universal and commercial banks that are maintaining rediscounting lines worth P353.967 billion with them. A small portion of this amount are accounted for by four thrift banks and 23 rural and cooperative banks that are also maintaining rediscounting lines with the BSP as of August 31.
The P6.12 million rediscounting loans as of end-September were availed of as production credits which used for processing of agricultural, animal, mineral, or industrial products. Bulk of production credits or 65.35 percent were used to finance industrial processing.
About 24.81 percent of released loans were for other credits and used as capital asset expenditures and funding permanent working capital. Other credits refer to 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.
As part of relief measures to banks while there is still a pandemic, the BSP reduced the term spread on its rediscounting facility to zero which means that the term spread on peso rediscounting loans relative to the BSP’s overnight lending rate will continue to be zero regardless of maturity, from 1-day to 180-days.
As defined by the BSP, rediscounting is a liquidity facility for qualified banks with active rediscounting lines. The temporary liquidity is used by banks to refinance the loans they extend to their clients using eligible papers as commercial credits, production credits and other credits.