KUALA LUMPUR: Banking institutions can use Malaysian Government Securities (MGS) and Malaysian Government Investment Issue (MGII) to meet the Statutory Reserve Requirement (SRR) compliance with effect from May 16.
Bank Negara Malaysia said on Tuesday this would release RM16bil worth of liquidity into the banking system. This flexibility is available until May 31,2021.
“The Statutory Reserve Requirement (SRR) ratio remains unchanged at 2%, ” it said.
It said the measure was part of its continuous efforts to ensure sufficient liquidity to support financial intermediation activity.
The SRR is an instrument to manage liquidity and is not a signal on the stance of monetary policy, it said.
Concurrently, Bank Negara's Monetary Policy Committee (MPC) slashed interest rates by 50 basis points to 2% which is the lowest level since 2010 as the domestic economic conditions have been affected by the Covid-19 pandemic.
The reduction of the Overnight Policy Rate (OPR) was within market expectations as the economy undergoes a contraction due to the Covid-19 pandemic that had had battered countries around the world.
The OPR is the sole indicator used to signal the stance of monetary policy.