Sri Lanka’s central bank cut the amount of cash that commercial banks need to keep as deposits in an attempt to bolster liquidity in the domestic money market.
(Bloomberg) — Sri Lanka’s central bank cut the amount of cash that commercial banks need to keep as deposits in an attempt to bolster liquidity in the domestic money market.
The monetary authority said it has reduced the statutory reserve requirement by 200 basis points to 2%, effective Aug. 17. Some 200 billion rupees ($2.4 billion) of liquidity will get added to the domestic money market and bring down lending rates, it said.
The move is in line with the Sri Lankan central bank’s easing cycle where 450 basis points have been cut from the standing lending facility rate in two successive meetings. The next rate decision announcement is scheduled for Aug. 24.
“The central bank will continue to monitor market developments, and take appropriate administrative measures, if required, to ensure faster reduction of market lending rates,” the monetary authority said in a statement Wednesday.
The rupee held on to its gains after the central bank’s move. It is up about 0.4% this month, after sliding more than 5% in July.
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