President's criticism forces CBSL to cut SRR to boost liquidity

COLOMBO (News1st): The Central Bank has reduced the Statutory Reserve Ratio (SRR) applicable on all rupee deposit liabilities of licensed commercial banks (LCBs) by 200 basis points to two per cent, with effect from June 16 to boost the liquidity in the banking sector. The move comes following the President's reproval of CBSL officials' behaviour during a meeting held on Tuesday. Accordingly, the SRR has been reduced the SRR by a total of 300 basis points so far in 2020, in addition to several other easing measures implemented already. The monetary authority has also reduced policy interest rates by a total of 150 basis points and the reduction of the Bank Rate by 550 basis points. "This reduction in the SRR injects around Rs. 115 billion of additional liquidity to the domestic money market," the central bank said in a statement. It added that the move will enable the financial system to expedite credit flows to the economy while reducing the cost of funds of LCBs. The financial sector is expected to pass the benefit of the high level of liquidity and the reduced cost of funds to the economy without delay, by increasing lending to businesses and households at low cost.