Philippine banks lent out money at a quicker pace in March in step with the central bank’s moves to pump the local financial system with cheap funds and buttress the economy, the Bangko Sentral ng Pilipinas said on Tuesday (May 12).

In a statement, the regulator said its preliminary data showed that outstanding loans of universal and commercial banks — net of their short term deposits with the central bank — grew by 12.9 percent in March.

This was faster than the revised 12 percent expansion recorded in the previous month, and also revealed a month-on-month seasonally-adjusted growth rate of 1.5 percent for commercial bank loans.

Loans for production, excluding deposits with the central bank, expanded at a rate of 12 percent in March, higher than the recorded revised growth in February of 9.4 percent.

The BSP said the “sustained increase” in production loans was driven primarily by lending to real estate activities (21.8 percent); financial and insurance activities (17.2 percent); wholesale and retail trade, repair of motor vehicles and motorcycles (6.8 percent); electricity, gas, steam and air conditioning supply (7.7 percent); and information and communication (20.8 percent).

Bank lending to other sectors also increased during the month, except for manufacturing which declined by 0.4 percent, and mining and quarrying which saw a 5.3-percent drop.

Growth in loans for household consumption eased to 22.9 percent in March from a revised 37.7 percent in February due to the slower expansion in credit card and motor vehicle loans during the month.

“It must be noted that community quarantine and enhanced community quarantine were declared March 15 and 16, respectively,” the central bank said. “Following this, the BSP crafted measures to ensure increased credit and domestic liquidity.”

These measures include a policy rate cut totalling 125 basis points since February 2020; the reduction of the reserve requirement ratios of financial institutions by 200 basis points; the conduct of asset-purchase activities in the market like the repurchase agreement with national government amounting to P300 billion and purchase of government securities in the secondary market; the easing of lending to micro, small and medium enterprises by allowing new loans to be counted as part of banks’ compliance with reserve requirements; and increase of the single borrower’s limit for loans granted by banks, among others.

“Going forward, the BSP will remain vigilant in monitoring liquidity and credit dynamics amid significant disruptions to economic activity,” the central bank said. “The BSP reassures the public of its commitment to deploy its full range of instruments to ensure that domestic liquidity and credit remain adequate amid the ongoing coronavirus pandemic.”

Edited by TSB


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