MANILA, Philippines—Peso-denominated loans secured by banks from the rediscounting facility of the Bangko Sentral ng Pilipinas surged in the first 10 months of the year, as record low interest rates encouraged banks to borrow more to support their own lending operations.
The BSP reported on Monday that banks secured P38.24 billion worth of peso-denominated loans from its rediscounting facility, up by nearly 70 percent from the P22.58 billion tapped in the same period last year.
Loans tapped from this facility are backed by loan collectibles of the borrowing banks and are meant to support their lending activities.
Officials said the decline in interest rates had made peso-denominated discount loans from the BSP more attractive.
The overnight borrowing rate, and thus the interest rate on discount loans, now stands at a record low of 3.5 percent. The latest figure was a result of four rate reductions of 25 basis points each that the BSP implemented this year.
The cuts in the overnight borrowing rate, which influence commercial interest rates, are meant to help boost appetite and demand for loans.
The BSP expects the increase in loans to fuel more consumption and investments.
The BSP hopes that the increase in supply of and demand for credit will help beef up overall domestic demand and thus maintain robust economic growth, even as export earnings drop due to anemic global demand.
Monetary officials said that at this time when export markets are weak, the Philippines should rely less on exports and instead strengthen domestic demand to stay afloat.
They said the low-interest rate environment should help the local economy grow despite global economic woes.
The Philippine economy, measured in terms of gross domestic product, grew by 6.1 percent in the first semester from a year ago, an acceleration from the 4.2 percent recorded in the same period last year.
The government is confident that the full-year economic growth target of 5 to 6 percent will be attained.
Meantime, data from the BSP also showed that dollar-denominated loans tapped by banks from the rediscounting facility fell in the first 10 months of the year. The dollar-denominated loans amounted to $155.1 million in January to October, down by 13.5 percent from $179.3 million in the same period last year.
Officials said the increase in demand for peso-denominated loans and the decline in dollar-denominated ones indicated that banks expect their corporate clients to require more peso-denominated borrowings in the coming months.