Aiming to provide low-cost financing, especially to companies engaged in foreign currency-earning activities during the monetary tightening process, the Turkish Central Bank (CBRT) is expanding credit channels for this sector.
The increase in the CBRT’s low-cost loans accelerated in 2023. At the end of 2022, the size of TRY and foreign currency denominated loans stood at TRY 265 billion, while the figure rose to TRY 445 billion by the end of 2023. Most strikingly, the amount of TRY-denominated loans doubled.
Especially after the elections, with the increase in rediscount limits and the limitation of the cost, TRY-denominated low-cost loans doubled in 2023, while foreign currency loans, which stood out in previous years, declined by 9.15 percent with the effect of the currency shock. In total low-cost loans in both foreign currency and TRY, the increase in 2023 exceeded 68 percent.
The new management of the CBRT is trying to mitigate the impact of the increase in loan rates with a selective loan policy, following the rise in the policy rate with the return to the traditional monetary policy. For this reason, after the elections on May 2023, the limits of rediscount credits were increased, which increased up to 10 times, and costs were limited so as not to be affected by the increase in the policy rate. The daily rediscount limit increased to TRY 3 billion, while the interest rate remained at 25.93 percent. The policy of CBRT rate stands at 42.5 as of December 2023. In addition, the advance loans with investment commitments (YTAK), which were put into effect on May 31, 2020 during the pandemic period but did not make much progress, were updated and applications started to be received as of December 20, 2023. The real impact of the YTAK loans will be observed in 2024.
TRY-denominated loans up by 101 percent
Other TRY-denominated loans, including advance loans with investment commitments (YTAK), were TRY 29 billion at the end of 2022 and increased by 197.2 percent to TRY 86.2 billion at the end of 2023. The size of these loans at the end of 2021 was only TRY 2.3 billion. The increase in other loans is expected to gain more momentum in 2024 after the update of the YTAK. The total size of rediscount and other TRY-denominated loans increased to TRY 373.8 billion at the end of 2023, marking an increase of 101 percent compared to the end of 2022. The share of such loans in the Central Bank’s total TRY assets was 15.4 percent, while their share in the Central Bank’s total assets was calculated as 5.4 percent.
The size of total loans in both TRY and foreign currency reached TRY 445 billion by the end of 2023. At the end of 2022, it was TRY 265 billion. This shows that the low-cost loans provided by the Central Bank grew by 68.3 percent in one year.
Rediscount has gained a significant weight in the CBRT’s low-cost loans. According to the CBRT’s analytical balance sheet, while TRY-denominated rediscount credits were TRY 7.6 billion at the end of 2021, they increased to TRY 157 billion at the end of 2022. Throughout 2023, TRY-denominated rediscount credits continued increasing, ended the year at TRY 287.6 billion. This represents an increase of 83.24 percent compared to the end of 2022. Both Central Bank Governor Hafize Gaye Erkan and Treasury and Finance Minister Mehmet Simsek signaled that the daily rediscount limit of TRY 3 billion will be increased in the coming period. Throughout 2024, the rapid increase in rediscount credits is expected to continue.
Commercial loan growth in banks 15.7
According to Central Bank data, total loans in the banking sector grew by 24.54 percent at the end of 2023 on a 13-week annualized and exchange rate adjusted basis. While total loan growth was 12.66 percent in public banks, it was 37 percent in private banks. Total commercial loans, on the other hand, closed the year with a growth of 15.71 percent in 13-week annualized and exchange rate-adjusted terms. At the beginning of December, commercial loan growth was 21.3 percent, above the 20 percent level. While commercial loan growth in public banks was 11.71 percent, commercial loan growth in private banks stood out with 20.8 percent. Private banks’ commercial loans had started to shrink at the end of June. So much so that as of August 11, the 13-week annualized, exchange rate-adjusted commercial loan contraction in private banks had reached 14.22 percent. However, in addition to monetary tightening, the simplification steps taken by the CBRT brought an increase in commercial loan interest rates, which increased the commercial loan appetite of private banks.
