CBSL reduces Statutory Reserve Ratio from 4 to 2 per cent

The Monetary Board of the Central Bank of Sri Lanka, at its meeting held yesterday decided to reduce the Statutory Reserve Ratio (SRR) applicable on all rupee deposit liabilities of Licensed Commercial Banks (LCBs) by 200 basis points, from 4.00 per cent to 2.00 per cent, with effect from the reserve maintenance period commencing August 16, CBSL said in a statement.

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. 

"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," the CBSL said. 

While LCBs are expected to pass the benefit of the SRR reduction to their customers without delay, the Central Bank will continue to monitor market developments, and take appropriate administrative
measures, if required, to ensure faster reduction of market lending rates.