The Bangko Sentral ng Pilipinas (BSP) has increased the rates it charges on its Peso Rediscount Facility effective on Monday, June 10.

The BSP said Friday that the applicable rediscounting rate for the 1-90 day maturity is adjusted higher to 7.6343 percent versus 7.6134 percent in May.

The 91 to 180-day tenor was also raised to 7.7686 percent from the previous 7.7268 percent.

Rediscounting is a BSP credit facility extended to qualified banks with active rediscounting lines. The facility helps banks meet their temporary liquidity needs by refinancing the loans they extend to their clients using the eligible papers of its end-user borrowers.

The peso rediscount rates are based on the BSP overnight or ON 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 EDYRF rate for US dollar-denominated rediscounting loans by June 10 will be 7.84000 percent for 1-90 days, 91-180 days and 181-360 days.

For the yen-denominated EDYRF, the rates will be as follows: 2.22808 percent for the 1-90 days; 2.28872 percent for the 91-180 days; and 2.40500 percent for the 181-360 days.

“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 no longer disclose if there are new availments for the rediscounting facility, not since September 2023. 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 rediscounting window is not competing with existing rediscounting facilities in the market.

The BSP 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 fall short of demand; or when banking institutions meet an unexpected shortage of reserves or funding for their temporary liquidity needs.

As of May 16, the BSP’s target reverse repurchase (RRP) rate which is the policy rate is at 6.5 percent while its ON lending rate is seven percent.