By Lee C. Chipongian
The central bank’s rediscounting facility amounted to P116.57 billion as of end-August this year, significantly more than previous year’s P20 billion as banks avail more funds for short-term liquidity needs.
The Bangko Sentral ng Pilipinas (BSP) said 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.
About 64.93 percent of availments are other credits for capital asset expenditures, which is 40.27 percent of total borrowings. In the meantime, 20.56 percent are loans to other services, 4.05 percent for permanent working capital, and 0.05 percent for housing loans.
Commercial credits accounted for 35.06 percent of total rediscounting loans. These are 24.66 percent as bank loans for importation and 10.39 percent for trading of goods or products. Production credits only had a 0.01 percent share of total rediscounting loans and these are bank loans for agricultural production.
Rediscounting is one of the BSP’s standing credit facility and enable banks to liquidate and refinance loans using securities as collaterals. Basically, banks turn to rediscounting loans for their temporary liquidity requirements.
The banks may use the proceeds of rediscounting loans for new loans to other borrowers, or to address its liquidity needs. In effect, the rediscounting cycle helps sustain the bank’s funds for relending to its borrowers and, at times, service withdrawals.