Turkey's state-run Vakıfbank offers cheap loans to help economy
Vakıfbank, one of Turkey’s three large state-owned banks, cut interest rates on loans in a latest move to help embattled consumers.
The institution reduced rates on car loans, mortgages and general consumer loans, according to a statement on Thursday, Dünya newspaper reported.
Vakıfbank will charge 1.59 percent monthly on consumer loans, down from a previous 1.77 percent. It reduced interest rates on car loans to 1.55 percent from 1.72 percent and on mortgages of up to 1.5 million liras ($282,000) to 1.49 percent from 1.63 percent.
The rates on the loans are below the current annual consumer price inflation rate of 20.4 percent.
Turkey’s government, facing local elections on March 31, is persuading state-run banks to reduce interest costs for consumers and businesses after a currency crisis ripped through the country’s overheating economy last year, leading to a surge in inflation and interest rates.
The other two major state-run banks in Turkey – Ziraat Bank and Halkbank – are under the control of Turkey’s sovereign wealth fund, chaired by President Recep Tayyip Erdoğan, and have also cut interest rates on loans and offered to restructure some other borrowing by consumers and businesses, including credit card debt, at preferential terms.
The government hopes that the measures will prompt other banks to offer loans at lower cost. Such a strategy, however, risks a deterioration of banks' balance sheets, which are already under pressure because many consumers and businesses are reneging on debt repayments or seeking to renegotiate loans.