KUALA LUMPUR (March 19): Bank Negara Malaysia (BNM) has announced a 100-basis-point cut in the statutory reserve requirement (SRR) ratio from 3% to 2%, effective March 20.
In a statement, it also said each principal dealer will be able to recognise Malaysian government securities and Malaysian government investment issues (MGS and MGII) of up to RM1 billion as part of the SRR compliance.
"This flexibility to the principal dealers is available until March 31, 2021. These combined measures will release approximately RM30 billion worth of liquidity into the banking system," it said.
The SRR, it went on to say, is an instrument to manage liquidity and is not a signal of the central bank's stance on monetary policy. "The overnight policy rate (OPR) is the sole indicator used to signal the stance of monetary policy, and is announced through the Monetary Policy Statement released after the Monetary Policy Committee meeting,” said BNM.
This is the second SRR cut in four months, with the last being the 50bps cut announced in November last year to 3%. The November cut is estimated to have released RM7.4 billion liquidity into the banking system.
Prior to that, the ratio was last lowered in 2016, from 4% to 3.5%.