SEBNEM TURHAN – MERVE YIGITCAN
The Turkish Lira Overnight Reference Rate (TLREF), which was around 10 percent in May, exceeded 34 percent in November. The update frequency in monthly loan installments fell to 7-15 days.
With the low-interest rate policy, the banking sector was providing floating-rate commercial loans to the private sector with a TLREF of 10% plus 3-5 points until the end of June. Now, TLREF has exceeded 34 percent and monthly installments have started to be updated every 7-15 days.
The low-interest rate policy implemented before the presidential elections also increased the private sector’s use of low-interest long-term TLREF-indexed floating-rate loans. In May, when the elections were held, banks extended loans with interest rates of TLREF plus 3-5 points, but the monthly installments of these loans returned to the private sector as a cost when TLREF rates rose to 34 percent. Due to the increase in TLREF volatility, the banking sector has now reduced its monthly installments to once every 7 to 15 days. Private sector representatives complain about the increasing cost.
Interest costs are constantly rising
Seref Fayat, Chairman of the TOBB Ready-to-Wear and Apparel Sector Assembly, said that in an environment where interest rates are on an upward trend, banks are acting with the expectation that the Central Bank will further increase the policy interest rate, thus constantly updating the interest rates.
“It is difficult to compete with these costs”
Ilker Onel, President of the Istanbul Merchants Club, reminded that the commercial loan costs of public banks before the elections were in the form of TLREF plus 2-3% and the average cost varied between 18-20%, and said that the process of slowing down domestic demand and tightening after the elections put the real sector in great difficulty due to constantly rising credit costs. Onel said that the average cost of commercial loans, which are currently used most by the real sector, varies between 45-50 percent in public banks, that those who are really in difficulty are demanding loans at the moment, and that it is not possible to compete internally and externally with these costs. Noting that the expectation that this tightening trend will continue in the coming period has also increased the updates in loan interest rates, Onel said, “Especially for SMEs, the financing side seems to be closed at the moment… Companies are having difficulty even producing. They used to fund their raw material needs in this way, but that is not possible with these costs. Firms are having difficulty even in production.”
