The reduction in the banks’ deposit reserves should soon translate to higher lending and a welcome move given the country’s multiyear infrastructure buildup program, the influential Bankers Association of the Philippines (BAP) said.
“In a few weeks, we expect that BAP member-banks will be able to extend additional credit to consumers and enterprises that require adequate funds for their personal and business needs,” BAP Managing Director Benjamin Castillo said.
The BAP is among the top financial associations in the country, with its members coming from the top universal, commercial and foreign lenders in the country.
The association welcomed the rather surprise move last Thursday that put an end to the long wait for changes in one of the highest reserve requirement ratios (RRR) in the region.
The deposit ratio is that portion of the depositors’ balance that banks keep idle in the vaults of the Bangko Sentral ng Pilipinas (BSP) that may not be used for loans and investments.
Just a week after the policy rates were kept frozen and unchanged, the seven-man Monetary Board of the BSP reduced the banks’ RRR by one percentage point, bringing it lower to 19 percent, from 20 percent at present.
The reduction in the deposit-reserve ratios takes effect on the reserve week beginning March 2.