The Bangko Sentral ng Pilipinas (BSP) has lowered the rates on its Peso Rediscounting Facility effective Wednesday, May 8, for all tenors.
Rediscounting is a standing credit facility provided by the BSP to qualified banks with active rediscounting lines help banks meet temporary liquidity needs by refinancing the loans they extend to their clients.
The BSP said the applicable rediscounting rate for the 1-90 day maturity will be lower this month at 7.6134 percent from its previous 7.6853 percent rate.
For the 91 to 180-day tenor, the rate was also reduced to 7.7268 percent from its previous rate of 7.8706 percent.
The peso rediscount rates are based on the BSP Overnight Lending Rate, while the US dollar and Japanese yen rediscount rates under the Exporters’ Dollar and Yen Rediscount Facility (EDYRF) are based on applicable benchmark rates.
“The appropriate spread on rediscount rates, as may be determined by the BSP, may change periodically to complement the changes in the BSP’s monetary policy goals and reflect movements in market interest rates,” the BSP reiterated.
The BSP overnight lending rate is at seven percent while the target reverse repurchase rate or the policy rate is steady at 6.5 percent.
The current EDYRF rate for US dollar-denominated rediscounting loans is 7.83730 percent for 1-90 days, 91-180 days and 181-360 days.
For the yen-denominated EDYRF, the rates are as follows: 2.19875 percent for the 1-90 days; 2.24000 percent for the 91-180 days; and 2.32875 percent for the 181-360 days.
Since September 2023, the BSP no longer discloses if there are new availments for the rediscounting facility. One of the reasons why banks are not tapping the facility is because the financial system is liquid and no need to borrow from the BSP for liquidity requirements.
The rediscounting facility operates as a temporary liquidity loan for banks to extend to their clients with eligible papers such as credit instruments including promissory notes, drafts or bills of exchange for commercial credits.
Production credits are also allowed which are used for production or processing of agricultural, animal, mineral, or industrial products. Other credits or 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 are also accepted.
The BSP said it uses its rediscount facility as an instrument to influence the volume of credit in the financial system and to act as the: short-term safety valve for the banking system when the aggregate supply for reserves falls short of demand; or when banking institutions meet an unexpected shortage of reserves or funding for their temporary liquidity needs.
But, the BSP said the rediscounting window is not competing with existing rediscounting facilities in the market.