Turkey’s state-run banks will cut commercial loan rates to single digits

Turkey’s state-run banks will reduce interest rates on all commercial loans to single figures, Treasury and Finance Minister Berat Albayrak said.

The cuts will happen before the end of the year, Albayrak said on Friday, according to Dünya newspaper.

Turkey’s government has instructed banks to slash interest rates on loans to businesses and consumers to help spur a recovery from a deep economic downturn. The largest state-run lenders – Ziraat Bank and Halkbank – are controlled by Turkey’s sovereign wealth fund, chaired by President Recep Tayyip Erdoğan, Albayrak’s father-in-law, since last year.

The economy is expected to grow by 5 percent on an annual basis in the fourth quarter of this year, Albayrak said. The economy shrunk by 1.5 percent in the third quarter, the third-straight quarterly decline.

Shares of Vakıfbank, the third largest government bank, were transferred to the Treasury earlier this month from an autonomous state-run institution.

Albayrak's announcement came after the central bank cut its benchmark interest rate by 200 basis points, or 2 percentage points, to 12 percent at a meeting on Thursday. The bank has slashed rates by 1,200 basis points since July.