Banks continued to enjoy ample liquidity in September, allowing the institutions to secure less discount loans from the Bangko Sentral ng Pilipinas.
Official data showed that in the first nine months of the year, the BSP extended P20.12 billion in discount loans to the banking sector. The amount represented a 56.5-percent drop from the P46.28 billion reported in the same period last year.
Commercial, thrift and rural banks avail themselves of discount loans from the central bank to ensure smooth lending operations especially when they are tied up with receivables.
The BSP charges an interest of 4.5 percent on discount loans on all maturities. The yield is pegged at the overnight borrowing rate of the monetary authority.
The decline in discount loans was due to the decision of the BSP to raise the overnight borrowing rate by 50 basis points earlier this year, which led to a hike in interest, and the rising level of liquidity now being enjoyed by banks.
The BSP reported that resources of the banking sector reached P7.3 trillion in June this year—up 12.6 percent from that of the same period last year.
The BSP said growth in resources was mainly driven by the increase in deposits placed by individuals and various enterprises.
Industry members said the rise in deposits allowed banks able to extend more loans and serve the consumption and investment needs of the public.
Some economists noted that while lending continued to grow by a double-digit pace this year, banks are still not serving enough borrowers as indicated by the huge deposits parked with the BSP’s special deposit account facility.
Banks have about P1.6 trillion deposited with the BSP, a record high.
But the regulator said that banks should always be prudent when they engage in lending activities to avoid increasing their exposure to defaults by borrowers.