The central bank said banks did not use its rediscount facility in August as demand for credit remained weak.
The Bangko Sentral ng Pilipinas (BSP) said in a statement on Friday that in the eight months to August, the overall use of the facility was P5.52 million, with lending activity only taking place in June and July.
He said there had also been no loans available under the Exporter Dollar and Yen Rediscount Facility (EDYRF) in the eight months.
Through the rediscount window, the central bank allows banks to draw additional funds in exchange for collateral such as receivables..
Banks can then use the facility’s pesos, dollars or yen to extend more loans to their businesses or retail customers and make unexpected withdrawals.
It is less convincing for banks to exploit the rediscount facility due to weak demand for loans, and with the financial system still inundated with liquidity, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC).
“Various regulatory relief measures mean that banks have effectively increased their loanable funds… liquidity injection measures, with the aim of encouraging banks to increase their lending activities since the pandemic, have also reduced the need for banks to use BSP rediscount facilities, ”he said. added.
The BSP estimates that bank loans slipped for the eighth consecutive month in July, down 0.7% from the previous year to 9,137 trillion pesos.
Lending continued to decline despite the 5.9% increase in money supply in June, as banks remained risk-averse during the prolonged economic downturn.
Last year, banks only used the rediscount window in March, April, August and September, profiting from 26.9 billion pesos, down 77.7% from the previous year..
Meanwhile, the EDYRF was not operated last year. – Beatrice M. Laforga