CBM increases the minimum reserve requirement ratio that banks must keep in Myanmar kyats from 3 percent to 3.5 percent

Published 4 May 2023

EMG

The Central Bank of Myanmar (CBM) announced that the minimum reserve requirement ratio that banks must keep in Myanmar kyats has been increased from 3 percent to 3.5 percent.

The financial conditions of the banks are 4.8 percent annual deposit growth rate and 6.5 percent loan growth rate at the end of March 2023. It is found that the bank's call deposits at the central bank increased by 35 percent compared to the same period of the previous year at the end of March 2023, and the cash balance of the banks increased by 36 percent.

In February 2023, the loan-to-GDP ratio was 28 percent, and the amount of operations (borrowing/lending) of banks in the interbank market was 1,166 billion kyats, an increase of about 98 percent compared to the previous year.

The financial condition of the banking sector is operating properly, and the banking sector has become stable and the amount of money has reached its goal due to higher access to kyat in foreign banks and private banks, strengthening the provision of finance by banks for trade, reaching the financial ease ratio of the entire banking sector to 30.47 percent after reducing significantly the balance of short-term loan services from the central bank by banks, and the non-performing loans (NPL) of banks decreased by 10.99 percent compared to the end of the previous financial year.

Therefore, in order to reduce the inflation rate appropriately and according to the current economic conditions of the country, among the monetary policy methods, the CBM will increase the minimum reserve requirement ratio to be kept in Myanmar kyat from the 3 percent to 3.5 percent during the minimum private money maintenance period started from April 26 to May 23, 2023.

Along with increasing the ratio of the minimum reserved money to be kept in Myanmar kyat, the average excess reserved money that banks must pay interest on in excess of the minimum reserved money to be kept will be adjusted from the current 10 to 50 billion kyats to 7 to 50 billion kyats and the interest rate will be increased from 3.5 percent to 3.6 percent.

The CBM is closely monitored the economic growth rate, inflation rate, monetary status, the financial ease of banks and the developments in the banking sector and appropriate monetary policy methods are being implemented to stabilize the value of the Myanmar kyat and the stability of the exchange rate.