Economy in Turkey: Cash advance installment limit reduced
While it was expected that there would be restrictions on credit card spending after the election, a striking move came today. Banks have reduced the number of installments for cash advances to three.
Before the election, as tension rose in financial markets, a notable step came from banks. It was said that a restrictive step would be taken regarding credit card spending, which has been high recently and is claimed to put pressure on inflation, current account deficit, and consequently exchange rates, after the election, but a step was taken before the election.
As of today, banks have reduced the number of installments for cash advances on credit cards to three. Last month, banks were offering up to 12 installments for cash advances. Banking sources speaking to sozcu.com.tr stated that credit cards and overdraft accounts are heavily used as the cheapest source of financing.
It was learned that there was no written instruction from the Central Bank (TCMB) to banks regarding the limit on cash advance installments, but verbal guidance was given. While TL loans increased by 5.5% in the first 9 weeks of the year, the increase rate in credit card spending reached 13.8%.
Last week, after February inflation exceeded expectations, the TCMB announced additional tightening measures. In the announcement, it was stated that within the scope of securities issuance based on credit growth, the monthly growth limit for TL commercial loans was reduced from 2.5% to 2%, the monthly growth limit for consumer loans was reduced from 3% to 2%, and the 2% limit for vehicle loans was maintained.
In order to increase the effectiveness of the implementation of credit growth limits, it was decided to impose mandatory reserves based on credit growth, in addition to securities issuance.
