Sign of financial independence and strength


The rural banking industry—along with the country’s entire banking system—has proven that it remains strong and sufficiently liquid since the start of the year, so much so that the central bank’s loan rediscounting facility has remained largely untapped so far.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that total availments of thrift and rural banks of the loan rediscounting facility dropped 96.5 percent year-on-year to P282 million as of end-February.

The rediscounting window, a credit facility designed by the BSP to help banks secure their liquidity standing, allows banks to obtain loans or advances from the BSP to meet their short-term financial requirements should they experience money supply problems.

The decline in availments was rather surprising given the BSP’s move to relax the borrowing limit of banks and its decision to provide banks with more options to avail of loans at interest rates based on the key policy rate of 3.5 percent, or on the overnight lending rate of 5.5 percent plus a premium.

However, as market pundits have pointed out, a sharp fall in rediscounting availments simply means rural banks remain viable and strong, having enough resources to address their financial requirements.

The fact that rural banks can sustain their lending to clients even without funding from the BSP only confirms their outstanding financial health, despite the challenges the industry faces.

This positive financial backdrop—where rural banks, as do the bigger banks, see no need to use the rediscounting facility—can be credited to the solid growth of domestic liquidity.

BSP had earlier said money circulating in the system was recorded at P6.9 trillion as of end-January, jumping 38.6 percent from the December 2013 figure.

This bodes well for the short-term and medium-term expansion plans of rural banks, as money flows freely in the system, providing both the bankers and clients opportunities for consumption.

With a stable and liquid grassroots banking system, market authorities have expressed hope that the public’s trust and confidence in rural banks will be reinforced.

A stronger faith in our rural banks would definitely strengthen the industry even more, and enable it to fulfill its mission as the bastion of development in the countryside.


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