At the start of a new week, banks across Turkiye have chosen to increase interest rates on personal loans, following a decision by the Central Bank’s Monetary Policy Committee (MPC) to hike the policy rate. This move fell short of expectations. This decision has prompted a ripple effect in the banking sector, with deposit interest rates decreasing and consumer loan rates increasing.
According to sources within the banking sector,the annual consumer loan interest rate has risen to 40 percent, even reaching 60 percent in some banks. In comparison, the Turkish Lira (TL) deposit interest rate has fallen below 40 percent.
The Banking Sector Reacts
Public banks have witnessed a minimum increase of 70 basis points in interest rates, whereas private banks have seen a rise surpassing 50 basis points. Despite the Central Bank’s upper-interest limit for commercial loans being updated in line with the policy rate, the issuance of commercial loans continues to be scarce.
“Commercial credit is hardly being given,” one source from the banking sector reveals, underlining the stark reality of a market with limited credit availability.
Rising Interest Rates
Both public and private banks have increased interest rates on consumer loans, with public banks now offering loans up to 70 thousand liras at an approximate annual compound interest rate of 32 percent, up from 25 percent. Private banks have also hiked their general-purpose loan interest rates between 2.90 percent and 5 percent this week.
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The Deposit Interest Rates Fall Below 40%
However, a source within the banking sector noted that although the general-purpose loan interest rate stands at 4.2 percent, loan interest rates on the market have risen above 40 percent. The same source emphasized the dual trends in interest rates, both for deposits and loans, and noted a marked increase in retail loan interest rates.
Moreover, they highlighted that maturities for consumer loans have shortened and are now being issued with a term of 12 months. This shift is due to insufficient relaxation of regulations, prompting the banking sector to increase loan interest rates.