The interest rate on Turkish lira deposits safeguarded from foreign exchange depreciation can be below the central bank’s policy rate, the monetary authority said Friday, continuing to roll back the so-called KKM scheme slowly.
The move, announced in the Official Gazette, stipulates that such deposit rates cannot be less than 85% of the policy rate,which the central bank has raised by 3,150 basis points to 40% since shifting to more conventional policymaking after the May elections.
Under a previous regulation, the interest rate could not be below the policy rate and the latest move may reduce the scheme’s attractiveness compared to normal deposit accounts.
The central bank is currently seeking to boost the share of lira deposits in the banking system and began in August to urge conversions from KKM to standard lira accounts.
The scheme, unveiled in late 2021, sought to keep dollarization at bay by encouraging people to keep their savings in lira through guarantees to compensate for losses from decline against hard currencies.
It helped reverse a trend of Turks opting for foreign exchange and gold to protect their savings amid depreciation in the lira.
The central bank has been announcing measures to dissuade companies and individuals from renewing the KKM accounts.