Commercial banks ordered to pass benefit of latest CB Statutory Reserve Ratio reduction on to cu...

The Monetary Board of the Central Bank of Sri Lanka, at its meeting held Tuesday, 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 percent to 2.00 percent.

The Central Bank, on Wednesday, announced that the decision comes into effect from 16 August 2023.

The Central Bank said this decision had been taken with a view to injecting liquidity into the banking system and further reducing 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 200 billion rupees of liquidity to the domestic money market, the Central Bank says.

This will allow Licensed Commercial Banks to further reduce the market lending rates as a result of the reduction in cost of funds, thereby supporting the expansion in credit flows to the economy, the Central Bank says.

The Licensed Commercial Banks are expected to pass the benefit of the Statutory Reserve Ratio 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.