KUALA LUMPUR: Bank Negara Malaysia (BNM) governor Datuk Nor Shamsiah Mohd Yunus said the recent announcement by the central bank to revise the statutory reserve requirement (SRR) was not done because a tight supply of the ringgit was seen.
“There’s no tight supply of our ringgit. BNM has a wide range of instruments to manage liquidity on a day to day basis.
“When the SRR was increased in 2011, there was a buildup of excess liquidity in the system arising from inflows. Over the years the structural liquidity has declined so there is no need to absorb that much liquidity on a permanent basis anymore,“ she said at a media briefing here this morning.
BNM announced on Nov 8 that it would be lowering the SRR ratio from 3.5% to 3% effective Nov 16, a surprise move given the central bank chose to maintain the Overnight Policy Rate at 3%.
“The decision to reduce the SRR is undertaken to maintain sufficient liquidity in the domestic financial system. This will continue to support the efficient functioning of the domestic financial markets and facilitate effective liquidity management by the banking institutions,” it said in a statement.
The SRR is an instrument to manage liquidity and signifies the minimum amount of reserves that must be held by a commercial bank. It is not a signal on the stance of monetary policy.
