Philippine banks have not fully reduced their lending rates at the level of cuts in the Bangko Sentral ng Pilipinas’ key policy rates.
In a briefing yesterday, BSP Deputy Governor Francisco Dakila Jr. said the average bank lending rate has been slashed by 161 basis points since January 2020, lower than the 200 basis points cut in the central bank’s key rates last year.
During the same period, the average interbank loan rate has been slashed by 229 basis points to date.
The cuts in the BSP’s key rates are targeted to encourage businesses and households to apply for loans to ensure that economic activities remain robust amid the pandemic.
“While there has been an adjustment in market interest rates because of the prevailing uncertainty in the economy and the outlook, then what we’ve seen is that there has been a much longer lag in the transmission of these to credit activity,” Dakila said.
Monetary authorities have said full transmission of the cuts in the BSP rates is expected after around 18 months.
As of January 2021, bank lending registered a year-on-year decline of 2.4 percent, compared to the previous month’s 0.7-percent drop.
Dakila said the pandemic has resulted in the reluctance of banks to lend, and borrowers to apply for loans.
“But again as the economy improves, then there should be a resumption of lending activity. And the latest survey of banks actually indicated significant recovery of the outlook for credit this year,” he added.*PNA