By Lee C. Chipongian
The central bank released P85.799 billion worth of credit under its peso rediscount facility for the first five months of the year, significantly higher than what was granted same time in 2018 of only P8.9 billion.
Rediscounting is one of the Bangko Sentral ng Pilipinas’ (BSP) standing credit facility and enable banks to liquidate and refinance loans using securities as collaterals.
These rediscounting loans represented borrowings against banks’ credits on transactions related to commercial, production and “other credits.”
Specifically, 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 BSP said other credits accounted for 64.51 percent of total rediscounting loans during the period. About 42.91 percent of other credits were availed of as bank loans for capital asset expenditures, while loans to other services were about 16.32 percent. Banks also borrowed for permanent working capital and housing loans.
Commercial credits, on the other hand, represented about 35.48 percent of total rediscounting loans as of end-May. These included bank loans for importation which accounted for 25.88 percent of total commercial credits, while trading of goods or products were about 9.60 percent.
The BSP said production credits which was a mere 0.01 percent of total rediscounting loans, were borrowed for agricultural production loans. As a monetary tool, rediscounting is used for liquidity control.
The credit 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.
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.