KUALA LUMPUR (May 8): Bank Negara Malaysia (BNM) announced on Thursday a 100-basis-point cut in the statutory reserve requirement ratio (SRR), which stipulates the amount of cash that lenders must keep in reserve, from 2% to 1% — its lowest in 14 years. The new rate will take effect from May 16.
This is the first SRR adjustment the central bank has made since March 2020, when it cut the SRR from 3% to 2%.
The last time the SRR was at this level was in March 2011, before it was hiked to as high as 4% in July 2011, then eased to 3.5% in February 2016, and 3% in November 2019.
This latest SRR cut will release about RM19 billion in liquidity into the banking system, BNM said in a statement on Thursday, adding the SRR is an instrument to manage liquidity in the banking system.
“The decision to reduce the SRR is part of BNM’s continuous efforts to ensure sufficient liquidity in the domestic financial system.
“This will facilitate banks to better manage liquidity in an environment of greater financial market volatility and provide continued support for financial intermediation activity,” it added.
BNM also underlined that the SRR is not a signal on the stance of monetary policy, the sole indicator of which being the overnight policy rate (OPR).
Earlier on Thursday, BNM’s Monetary Policy Committee kept the OPR unchanged at 3%. The key rate has been kept unchanged since May 2023, when it was raised from 2.75%.
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