BSP raises rediscount rate for April
The Bangko Sentral ng Pilipinas (BSP) has increased the rate for its shorter-dated peso rediscounting loans effective Friday, April 12, in the same week that its policy-making arm, the Monetary Board, decided to keep its key rate unchanged for the fourth policy meeting in a row.
The applicable rediscount rate for the BSP Peso Rediscount Facility will be 7.6853 percent for the 1-90 day maturity, up from March’s 7.5891 percent. The rate for the 91-180 day maturity, however, is lower at 7.8706 percent from 8.1782 percent last month.
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 current EDYRF rate for US dollar-denominated rediscounting loans is 7.41490 percent for 1-90 days, 91-180 days and 181-360 days. For the yen-denominated EDYRF, the rates are as follows: 2.08636 percent for the 1-90 days; 2.11000 percent for the 91-180 days; and 2.15474 percent for the 181-360 days.
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 BSP did not disclose if there were new availments for the rediscounting facility for the first quarter 2024. The assumption is that there are no takers for the facility. The last time BSP reported of rediscounting availment was September 2023.
One of the reasons 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 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’S Monetary Board in a policy meeting on Monday, April 8, decided to hold the 6.5 percent target reverse repurchase (RRP) rate or the benchmark rate.
The BSP has also retained the interest rate on the overnight deposit at six percent and lending facilities at seven percent.
BSP Governor Eli M. Remolona Jr. said they are more hawkish now than before and if they do not cut the RRP rate by the third quarter because inflation is still on the high side, then perhaps they could do a rate cut by the first quarter of 2025.
For the moment, he said the Monetary Board “deems it appropriate to maintain the BSP’S tight monetary policy settings.”