8 Billion Riel Released

KHMER TIMES
SOK CHAN

The National Bank of Cambodia is trying to promote use of the riel in the country. Reuters

The National Bank of Cambodia (NBC) on Tuesday released eight billion riel (about $2 million) at three percent interest to just one financial institution that joined the third bidding of the new Liquidity-Provided Collateralized Operation (LPCO).

According to a statement released by the NBC, the maximum bid is about eight billion riel and the minimum bid is about 200 million riel (about $50,000).

In October, the inaugural LPCO bidding saw the NBC release some 40 billion riel (about $10 million) to microfinance institutions (MFIs) and commercial banks at three percent interest.

The LPCO is intended to establish a benchmark rate from which to promote the use of riel in transactions and hopefully contribute to lowering the current high interest rates, NBC general-director Chea Serey recently explained.

“Through this instrument, [the NBC] hopes that it will influence the interest rate in the market since the NBC will issue riel to MFIs and commercial banks for their lending operations [and]...if it is successful, it will add convenience to managing the Cambodian banking sector,” she said.

Ms. Chea Serey was commenting on a prakas, or directive, issued by the NBC on December 6 that is effective until the end of 2019, instructing commercial banks and MFIs to make out more riel loans to their customers, in a bid to promote the use of the national currency.
The prakas states that all financial institutions should have at least 10 percent of their loan portfolio in riel.

The NBC revealed last week that of the $16 billion given out in loans by the country’s financial sector as of September 30, only about 4.5 percent was made in riel while the rest was in US dollars.

“Customers have the right to decide on whether to borrow in local or foreign currency, based on their business needs. But each institution has to encourage them to take out loans in riel and at least 10 percent of their loan portfolio has to be in local currency to comply with the prakas,” said the NBC announcement.

In Channy, president of Acleda Bank, told Khmer Times last week that of the bank’s total loan portfolio of about $2.7 billion, only five percent – or $100 million – was in riel.

“I think it is a good thing to promote the use of more riel in our economy because we seem to be using too much foreign currency. We seem to have more demand for riel in rural areas,” he said.