Selective credit policy, quantitative tightening steps… The Central Bank is implementing the monetary tightening process step by step. Financial stability is strengthened.
The Central Bank pressed the button at the June meeting for the gradual simplification and tightening process. It went to a 650 basis point rate hike.
Simplification in monetary policy
Within the scope of simplification, the first step came to the securities liability of banks.
The liability for the weight of the Turkish lira was reduced from 60 percent to 57 percent.
The rate of establishment of securities, which was 10 percent, was also reduced to 5 percent.
Credit growth has been capped
At the July meeting, the policy rate was increased by another 250 basis points. Then, selective credit and quantitative tightening steps came into play.
The monthly growth limit in Turkish lira commercial loans was reduced from 3 percent to 2.5 percent.
Export, investment, agricultural and artisan credits were excluded from this limitation.
The 3% growth limit in vehicle loans was reduced to 2%.
Inflation will be brought under control
The interest rate applied to credit cards and overdraft accounts was increased.
The monthly maximum interest rate increased to 2.89%.
Another regulation within the scope of simplification was for deposit accounts with currency protection. The implementation of the conversion target from foreign currency deposits to KKM was terminated.
The target was set to convert maturing currency-protected deposit accounts into standard Turkish lira deposits. Required reserve ratios applied to foreign currency deposits were increased.
Application instruction for KKM
The details of the regulation regarding the reduction of currency-protected deposits became clear. Implementation instructions have been sent from the Central Bank to the banks.
Accordingly, the conversion target from real person conversion accounts to TL time deposits was increased to 10 percent. This rate was applied as 5 percent. The maturity of the Turkish lira deposit to be passed has been determined as at least 32 days.
With the implementation instruction, it was also explained how banks are expected to reach the target of 95 percent renewal in conversion accounts and transition to TL.
At its last meeting in August, the bank increased interest rates by 750 basis points. A continuation message was given to the selective loan and quantitative tightening decisions.