Economy in Turkey: Central Bank’s new step in “FX Protected Deposit Accounts”

The Central Bank of Turkey (CBRT) continues its efforts to enhance the attractiveness of the Turkish lira with regulatory changes in FX Protected Deposit Accounts (FX PDA). With the latest amendment in the implementation directive, the minimum interest requirement for Turkish lira (TL) indexed FX PDA accounts has been removed. This change paves the way for banks to offer interest rates lower than the policy rate on TL indexed FX PDA accounts.

As a result of this change, standard TL deposits will be supported, while the interest rates offered on FX PDA accounts will no longer be competitive.

In cases where the exchange rate difference is higher than the interest or profit paid by the bank, but lower than the amount calculated based on the policy rate for FX PDAs, the difference will be covered entirely by the bank.

However, if the exchange rate difference exceeds the amount calculated based on the policy rate, the portion up to the calculated amount will be paid by the bank, while the remainder will be covered by the Central Bank.

This way, the CBRT aims to make Turkish lira deposits more attractive

The CBRT has taken a series of steps to make Turkish lira deposits more attractive

In August, the share of TL deposits within total deposits was targeted to increase by introducing a new TL share ratio that does not consider FX PDA accounts as TL deposits, instead of the FX share ratio that had been in effect in securities and reserve requirement practices.

In September, in line with data indicating an acceleration in transitions to TL, the monthly TL share increase target for individuals, initially set at 2%, was raised to 2.5%. Additionally, revisions were made to TL share calculations in line with transitions and renewals.

Furthermore, to ease credit flows, the invoice exemption threshold for exports, investments, and SME loans was increased from TRY 50,000 to TRY 250,000.