Central Bank announces new measures on credits, tightening

ANKARA

After delivering a 250 bps rate hike last week to increase the one-week repo auction rate to 17.5 percent, the Central Bank has announced a series of measures on selective credits and quantitative tightening.

The bank referred to a statement dated July 20 by the Monetary Policy Committee, which said that the simplification process, which would strengthen macro-financial stability and increase the functionality of market mechanisms, would continue gradually and that selective credit and quantitative tightening decisions were taken to support the monetary tightening process.

Some new steps have been taken as part of the simplification process, the bank announced on July 25.

“To complement the steps supporting the tightening process, it has been decided to set the monthly growth limit for Turkish Lira commercial loans at 2.5 percent, which was previously 3 percent under the securities maintenance practice based on loan growth,” the bank said in a statement.

Export, investment, agriculture and tradesmen loans are excluded from this limitation.

In order to increase the functionality of the market mechanism, the securities maintenance practice based on interest rates will be simplified, and accordingly, the first tier for lira commercial loans, excluding export and investment loans, will be removed and the interest rate cap as a single tier will be applied.

“To support the efficient use of financial resources, it has been decided to set the growth limit for vehicle loans at 2 percent, down from 3 percent, and to keep the 3 percent limit for general purpose loans unchanged.”

Furthermore, to control inflation and balance domestic demand, the monthly maximum interest rate applied to credit card cash utilization and overdraft accounts has been raised to 2.89 percent, the bank announced.

Export and investment loans as well as loans for the earthquake zone will be exempted from all credit restring measures of the Central Bank.

The bank also announced measures to support exporters’ access to financing.

Accordingly, the daily limit for rediscount credits has been raised to 1.5 billion liras and the small and medium-sized enterprises’ (SMEs) in rediscount credits will be increased. Export growth performance will be taken into account when extending credits.

“As part of the simplification process, conditions to access rediscount credits have been facilitated: The requirement to sell an additional 30 percent of export proceeds to use rediscount credits has been abolished. Foreign currency purchases for import payments have been exempted from the scope of the commitment not to buy foreign currency during the rediscount credit term,” the bank said.