With the interest rate cuts of the Central Bank (MB) reflected in the series, reflected in the loan rates, citizens who had difficulty in bringing the end of the month rushed to the banks to use consumer loans. The base rate in consumer loan interest fell to 0.89 percent in February. As interest rates fell, the use of loans exploded. Since July, when the CB started interest rate cut last year, the banking sector’s loan volume increased by 62.3 billion lira to 278.8 billion lira. Credit expansion, which increased consumption and thus triggered imports, frightened the MB. By linking the required reserve ratios to the credit growth of banks and determining their credit areas in this way, MB is now preparing to take measures against the explosion in consumer loans. Sources close to the sector state that the CB is looking for a formula that will curb consumer loans with the change in the reserve requirement policy.
OBJECTIVE IMPORT BRAKING
The regulation, which links the interest and humidity paid to TL required reserves to the annual growth rate of banks in loans, was put into effect by the CB in December last year. This regulation has been the target of criticism that has forced banks to expand credit with the ‘carrot-stick’ approach. In August, with a new regulation, the calculation of loan growth started to be adjusted from the consumer price index. In addition, reserve requirement provision was updated to encourage long-term commercial loans and housing loans. The last change of the MB was the use of the system for foreign currency required reserves. However, the required reserve policy implemented by the MB did not give the desired result. As there was no desired increase in commercial loans that support production, there was an explosion in consumer loans that increased consumption. Now, an upward trend of 30 percent in consumer loans in the last 7 months is tried to be prevented. Pointing out that the imports, which started to increase in recent months with the triggering of consumption, brought the “current deficit” problem back on the agenda, bankers describe the regulation as “macro precautionary measure”.
Interest decreased to 0.89 percent
The Central Bank Chairman Murat Uysal has made an interest rate cut of 1,375 basis points in 7 months since his office in July 2019. Interest rates fell from 24 percent in the 7-month period to 10.75 percent. At the point reached, especially consumer loan rates fell to 0.89 percent. The rates closest to these levels were last seen in June 2013. In early 2019, interest rates of 2.5 percent to 3 percent were applied per month on consumer loans. Consumer loan interest rates fell to 14,144 percent annually as of February 21.
