Turkish Central Bank Raises Withholding Taxes, Loosens TL Transition Targets

The Central Bank of Turkey (TCMB) has taken multiple steps to recalibrate financial regulations, raising withholding tax rates on short-term lira deposits and investment funds while simultaneously easing TL transition targets for banks. New measures also adjust reserve requirement rules and exempt specific loans from credit growth limits.

Withholding Tax on TL Deposits Raised Again

A presidential decree published in the Official Gazette announced higher withholding tax (stopaj) rates on Turkish lira-denominated financial instruments:

• Short-term TL deposits and investment funds (under 6 months) will now be taxed at 17.5%, up from 15%.

• Deposits up to 12 months will see withholding tax rise from 12% to 15%.

• Rates on deposits over one year remain unchanged for now.

The last adjustment came in February 2025, and the previous rate structure had been extended until July 31 under a separate decree in May.

TL Transition Targets Cut for Banks

In a simultaneous move, the TCMB lowered the mandated Turkish lira transition thresholds that banks must meet under the KKM (FX-protected deposit) to TL conversion program.

Effective July 5, the new targets are:

• Commercial banks: from 60% down to 40%

• Participation banks: from 45% down to 25%

However, banks that fall short of these targets will still be subject to a hefty 8% commission penalty on their shortfall.

Reeskont Loans Exempted from Credit Growth Caps

The central bank also revised its reserve requirement rules tied to credit growth:

• Reeskont loans issued for export or FX-earning services will no longer be included in credit growth calculations.

• These loans will also be excluded from balance sheet-based loan expansion limits.

The exemption allows banks to continue financing exporters without breaching growth caps or attracting reserve penalties.

Banking sources speaking to Bloomberg HT described the impact of lowering TL transition targets as limited, as most banks are already meeting those thresholds without difficulty. They also welcomed the relaxation of conditions tied to remuneration on required reserves.

TOBB’s SME Loan Program Outside Growth Limits

In a parallel decision, the TCMB notified lenders that the new TOBB Nefes Loan program will also be excluded from credit growth ceilings. The measure allows banks to extend financing to SMEs without breaching macroprudential thresholds.

Jointly launched by the Union of Chambers and Commodity Exchanges of Turkey (TOBB), Credit Guarantee Fund (KGF) and several Turkish banks, the program offers:

• Loans of up to 2.5 million TL per firm

• A 6-month grace period

• Maximum maturity of 36 months

• 80% government-backed guarantees via KGF

Applications open on July 8–9 through Ziraat Bank, Halkbank, Vakıfbank, Akbank, Yapı Kredi, Denizbank and Ziraat Katılım.

A “Soft Calibration” of Policy

Sector analysts view the overall set of moves as a “soft recalibration” of policy: designed to support the lira without overburdening the banking system.

The decision to exclude reeskont loans and TOBB Nefes Loans from reserve requirement calculations offers targeted relief while keeping pressure on the liraization process.

Still, no significant acceleration is expected in TL deposit inflows, as most banks already exceed the reduced thresholds.