Turkey's Central Bank Raises Credit Growth Limits and Imposes Interest on Reserve Requirements

The Central Bank of the Republic of Turkey announced a new regulation covering consumer and vehicle loans as well as macro-financial stability. The bank said the change aims to support monetary transmission and macro-financial stability. It also stated that banks will make their own lending decisions based on their own policies.

Under the new rule, the eight-week growth limit for consumer and vehicle loans increased from 3 percent to 3.5 percent. For Turkish lira loans extended to small and medium-sized enterprises, the limit rose from 5 percent to 5.5 percent. For Turkish lira loans to enterprises other than SMEs, the limit increased from 2 percent to 2.5 percent.

“Banks will make their own decisions on loans according to their own policies.”

The Central Bank also changed the required reserve framework. Banks and finance companies must now pay interest or compensation in Turkish lira on required reserves set for Turkish lira and foreign currency liabilities other than deposits with maturities longer than one year.

The bank expects the changes to slightly loosen banks' credit channels. Both outlets reported the same figures and policy rationale without offering conflicting details.