CB reduces Statutory Reserve Ratio, frees Rs. 200 bln liquidity for lending

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The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on August 8, decided to reduce the Statutory Reserve Ratio (SRR) applicable on all rupee deposit liabilities of Licensed Commercial Banks (LCBs) by 200 basis points, from 4 per cent to 2 per cent, with effect from the reserve maintenance period commencing August 16.

This decision was taken with the view to inject liquidity to the banking system and further reduce market liquidity deficit on a permanent basis, in line with the current monetary policy stance of the Central Bank, the banking regulator said on Wednesday.

This reduction in the SRR is expected to release around Rs.200 billion of liquidity to the domestic money market, which would enable a further downward adjustment in the market lending rates as a result of the reduction in cost of funds of LCBs, thereby supporting the expansion in credit flows to the economy.

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