By Nevzat Devranoglu
ISTANBUL (Reuters) - Turkey's central bank on Monday effectively raised the ceiling on loan growth targets needed for banks to qualify for lower required reserve ratios, while introducing regulations aiming to channel loans to production-oriented sectors.
The measures are the latest move by the bank to adjust banks' reserve requirements to boost Turkey's economy after a recession triggered by last year's currency crisis and a surge in inflation and interest rates.
Banks with a "real" loan growth rate of between 5% and 15%, after inflation, will have only 2% required reserve ratio on most lira deposits - compared with an earlier band of 10%-20% which did not factor in Turkey's double-digit annual inflation.
The bank has also cut its policy rate by 10 percentage points this year to 14%, and is expected to announce a further cut on Thursday.
On Monday it said that under the new required reserve regulations, banks' real cash loan value will be calculated by dividing the nominal loan amount by the consumer price index in the relevant period.
The real annual loan growth rate, which will only take into account lira loans, will be calculated based on the most recent three-month average of the real cash loan stock values, excluding loans extended to financial institutions.
PRODUCTION-ORIENTED
The new reference values and guidelines for loan growth calculations will also help to preserve the benefits for state banks, which the government has relied on to drive lending. Two banks had risked running over the previous top limit of 20%, Reuters reported last month.
The changes also include the removal of some housing and consumer loans from banks' loan growth calculations, which the bank said aimed to channel loans to production-oriented sectors, such as manufacturing, rather than consumption-oriented ones.
"Long-term commercial loans that have a strong relation with production and investment, and long-term housing loans that have a weak relation with imports will be encouraged," the bank said.
"They are trying to alleviate some investor concerns that credit will be driven mainly towards consumption (which) will suck in more and more imports," said Jason Tuvey, senior emerging markets economist at Capital Economics, adding that recent loan growth had been mainly driven by consumer loans rather than commercial loans.
There have been concerns that boosting consumer lending could lead to new imbalances, rising inflation, and a widening current account deficit, all of which would ultimately lead to the central bank hiking rates again, he said.
At the new top limit of 15% real loan growth, housing loans with a maturity of five years or more, as well as commercial loans with a two-year and longer maturity, will be subtracted from the total loan growth.
Banks will need to remain at or above 5% growth after 50% of the real change in retail loans, excluding housing loans with a five-year and longer maturity, is subtracted from the total growth rate.
For banks that do not fall within the new reference values, required reserve ratios are set at 4%-7% for deposits with maturities less than a year.
(Additional reporting by Ali Kucukgocmen and Can Sezer; Editing by Himani Sarkar/Mike Harrison/Jane Merriman)
