Cut in banks’ reserve requirements to pump P10-B into economy

MANILA – About PHP10 billion worth of liquidity is expected to be released into the system from the 1-percent cut in thrift banks (TBs) and rural and cooperative banks’ (RCBs) reserve requirement (RR) effective July 31, 2020.
“Reduction of 1 percent on deposits/deposit substitute liabilities amounting to (PHP)1 trillion of TBs and RCBs will release estimated liquidity of PHP10 billion,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno told journalists in a message Tuesday.
The cut is in line with the central bank’s bid to help lift the economy by ensuring there is enough liquidity to support economic activities and address the impact of the pandemic.
Diokno has been authorized by the policy-making Monetary Board (MB) to reduce banks’ RR by as much as 400 basis points this year.
He already directed the 200 basis points reduction in universal and commercial banks (U/KBs) and non-bank financial institutions (NBFIs) with quasi-banking functions RR last March.
In a statement, the central bank said the RR cut for TBs and RCBs brought their RR to 3 percent and 2 percent, respectively.
“The reduction is expected to increase lending capacity of these banks to support financing requirements of their micro-, small- and medium enterprise as well as rural community-based clients. It will also help lower intermediation cost and ease financial strain faced by these banks’ customers,” it added. (PNA)