CB reduces reserve requirement for banks on global crisis
2008-10-13 16:43:33

The Central Bank of Sri Lanka (CB) on Monday said it was reducing the Statutory Reserve Requirement (SRR) for all commercial banks in a bid to release more liquidity in the market as a buffer against the global financial crisis impacting here.

The SRR of commercial banks will be reduced by 75 basis points to 9.25 % effective from the next ‘Reserve Week’ from October17, and this will enable the market to access additional liquidity of around Rs 7.5 billion.

“This step has been taken in order to inject more liquidity to the domestic financial market so as to enable the market to effectively face any liquidity constraint that may arise as a result of the ongoing turbulence in the global financial markets,” the CB said in a statement.

To strengthen this move, the CB said it has also decided to further relax the access of commercial banks and Primary dealers to its reverse repo facility with effect from 15 October, by providing liquidity, when the market is short, at its reverse repurchase rate for a maximum of 10 times per calendar month, up from the current 6 times.

The above two measures, which would be in force until December 31, are being introduced as a necessary precautionary intervention in the face of the extraordinary adverse developments in the global financial markets.