Naypyidaw- The Central Bank of Myanmar (CBM) has announced an increase in the interest rate on banks' excess reserves from 3.8% to 6%, effective immediately. The decision issued under Directive No. (4/2024), aims to enhance liquidity, support banks' interest income, and maintain financial sector stability.

According to the CBM's statement, the new policy applies to banks holding excess reserves above the minimum required balance in Myanmar kyat (CAB). The adjustment is intended to reduce excessive liquidity outside the central bank, ensure a proper interest rate structure, and provide banks with additional earnings.

The decision was made during the Monetary Policy Committee meeting held on February 28, 2025. Under the revised framework, only banks with an average excess reserve of at least 7 billion kyats will be eligible for interest payments, with a maximum allowable excess reserve of 50 billion kyats.

By implementing this policy, the CBM aims to strengthen financial sector stability and improve liquidity management across the banking system.

The Central Bank of Myanmar will review the minimum and maximum interest rate on the reserve funds and the interest rate on the average reserve funds from time to time and adjust (increase/decrease) to meet market needs.

The interest will be calculated based on the average reserve funds on the last day of the minimum reserve requirement maintenance period and will be automatically credited to the relevant bank’s account at the Central Bank of Myanmar on the last day of the maintenance period.

The interest on average net surplus will be implemented from the maintenance period from March 26 to April 22, 2025. The interest on average net surplus will be applied uniformly to state-owned banks, private banks, and foreign bank subsidiaries that are permitted to provide retail banking services in Myanmar kyat.