Funds parked in SDA facility declining, BSP says

Money placed by banks in the central bank’s Special Deposit Account (SDA) facility started to decline in June from record levels seen in previous months, according to the Bangko Sentral ng Pilipinas.

BSP data showed that money in SDAs reached P1.39 trillion as of end-June this year, a decline from a high of P1.5 trillion seen in previous months, but still significantly higher than the P834.4 billion registered in the same period last year.

Industry players said the drop in the amount of funds parked in the SDA facility in June indicated that banks are using more of their resources to lend to consumers and enterprises.

In June, the decline in SDA deposits from previous months’ levels came with the accelerated rise in bank lending.

According to data from the central bank, outstanding loans from universal and commercial banks as of end-June grew by 18.8 percent to P2.59 trillion from P2.18 trillion as of the same period last year.

The growth in lending in June was the fastest pace recorded since April 2009, the central bank said.

Growth in loans benefited both the consumer and enterprise sector.

Outstanding loans to individual borrowers grew year on year by 14 percent to P206 billion. Outstanding loans to enterprises, on the other hand, expanded by 21 percent to P2.26 trillion.

Banks are urged to extend more loans, especially those that will help fund the government’s priority infrastructure projects under the Public Private Partnership (PPP) program, to help boost the economy.

Under the PPP program, the government invites private enterprises to invest in public infrastructure.

Placements in SDAs have been growing consistently given the huge amount of excess cash of banks.

The BSP is drawing a big portion of these excess funds because the SDA offers good returns at virtually no risk.

Economists said placing a significant amount of excess liquidity in SDAs prevents banks from fully supporting growth of the economy through the grant of more loans to households and enterprises.

They also said the economy could have grown much faster than the 4.9 percent registered in the first quarter if banks had used more of their funds for lending. The official growth target for this year is between 5 and 6 percent.

Industry players, on the other hand, said lending could grow at a faster pace if there were enough demand for loans from investors with viable project proposals.