Rediscount means exchanging (rediscounting) securities against a price that had already been exchanged (discounted) before. The CBRT may accept commercial bills and documents to be presented by banks for rediscount, provided that they bear at least three signatures of solvent persons.
General framework of advances and rediscount credits are governed by Article 45 of the CBRT Law.
In order to the meet the temporary liquidity needs of the banking sector, the CBRT accepts commercial papers and certificates provided by banks for discount. In Turkey all conditions and rules governing rediscount transactions are determined by the CBRT. Moreover, the CBRT sets forth the maximum limits for rediscount credits and limits by credit types within the context of the principles of the monetary policy.
The interest rate that the CBRT applies to these transactions is called the discount rate. The CBRT may also grant advances against the bills that it may accept for rediscount. The bills that may be accepted as collateral for advance payments are commercial bills and documents, government bonds and stocks quoted in the stock exchange. The discount rate that is determined in view of the monetary supply and credit extension in the economy has lost its significance as a monetary policy instrument under the current monetary policy framework.