On March 7, 2002, the Monetary Board, under its Resolution No. 358 has approved the amendments to MB Resolution 1530 dated September 27, 2001, thereby allowing the rural banks to rediscount with the Bangko Sentral ng Pilipinas (BSP) promissory notes backed by untitled lands (tax declarations) over a period of five (5) years.
It may be recalled that the Rural Bankers Association of the Philippines (RBAP) requested the amendment of MB Resolution 1530 which has previously allowed for one-year extension for the rediscounting of loans secured by tax declarations subject to a 25% quarterly reduction.
The latest extension of five (5) years covers a phase-out program with a yearly reduction at the rate of 10% for the first year, 20% each for the second and third years, and 25% each for the last two years with each reduction to be determined as of November 30, starting this year and every year thereafter.
The BSP has encouraged rural banks to extend loans to borrowers with collaterals secured by titled lots in line with its thrust of strengthening the collateral position of all rediscounted loans and thereby providing additional protection to the interest of the government and the rural banks as well. It has been observed that rediscounting arrearages of rural banks have been on the upward trend that the BSP has resorted to hiring external lawyers to pursue collection cases. However, considering the kind of collaterals that used to secure most of their loan accounts, the problem of collection proved to be a burden.