MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) trimmed the level of cash banks need, as the Philippines struggles to hit its economic growth target.

The BSP monetary board approved on Friday, September 27, the lowering of the reserve requirement ratio (RRR) by 100 basis points from 16% to 15% effective on the first week of November.

RRR for mid-sized banks was also reduced by 100 basis points from 6% to 5%. Rural banks’ RRR was also trimmed to 3% from 4%.

The move is estimated to free up around P100 billion into the financial system. 

The BSP announced the cut in the same week it decided to lower interest rates.

“[T]he adjustment in reserve requirement ratios is aimed at increasing domestic liquidity in support of credit activity,” the central bank said.

The lowering of the RRR and interest rates comes as the global economy is expected to slow down and inflation in the Philippines continues its downtrend. 

The Philippines has one of the highest RRR in the world. BSP Governor Benjamin Diokno previously said he wants this to be brought down to a single digit.

With the adjustments, consumers are expected to enjoy loans with more enticing terms and rates. Higher loan availments, in turn, would boost consumption and economic growth. – Rappler.com