The cash advance, which allows people to withdraw cash with
a credit card, is popular in Turkey because of its lower
borrowing costs and because of limits on retail loans.
"Demand is high for cash advance with instalments," a
banking source said. "People want to keep cash at hand as there
is uncertainty around elections ... Some banks want to limit
lending from this channel as the interest rate is very low."
Banks are sometimes cutting by almost half the cash advance
limits and maturities, due to uncertainty around the outcome of
the elections and expectations of interest rate hikes, the
sources said.
President Tayyip Erdogan will put his two-decade rule on the
line on Sunday when he faces opposition challenger Kemal
Kilicdaroglu in Turkey's landmark elections.
Another banker said banks are reluctant to lend by cash
advance as the upper limit on interest rates for the cash
advances is determined by the central bank.
"The demand skyrocketed," the second banker said. "Since the
banking sector does not have the ability to set (the) interest
rate of this channel they are trying to find a solution to it by
cutting maturities and the number of people (that) can borrow
through this channel."
(Editing by Jane Merriman)
By Ebru Tuncay and Nevzat Devranoglu
ISTANBUL, May 12 (Reuters) - Some Turkish banks are
cutting back on a cheap source of cash for retail customers, six
banking sources told Reuters, as the country faces tight
national elections this Sunday.
The banks' cash advance product has provided a lifeline to
Turks, with its around 20% annual interest rate, a third of what
borrowers will be charged on a bank loan.
People have had their purchasing power eroded under Turkey's
high inflation, which hit 85% last year after a currency crisis
caused by unorthodox economic policies. The inflation rate
dropped to 43.7% in April.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.