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Reserve requirement

The Central Bank shifted its monetary policy from direct to indirect credit control. The Reserve Requirement became the main instrument of monetary policy.

The reserve requirement entails that banks are required to deposit a fixed percentage of their domestic liabilities at the Central Bank on a non-interest bearing blocked account. The reserve requirement percentage is determined on a monthly basis, based on the developments in the free reserves of the commercial banks, the pace of credit growth, and the official foreign exchange reserves vis-à-vis benchmarks determined by the Central Bank.

The rationale behind this instrument is that by controlling the liquidity in the banking system the potential for credit extension can be controlled.

Download the Reserve Requirement

Last updated: 14.01.2021 06:01