The Bangko Sentral ng Pilipinas cut the reserve requirement ratio, effective March 30, for universal and commercial banks, after cutting policy rates last week.

Bangko Sentral ng Pilipinas (BSP) Gov. Benjamin Diokno on Tuesday ordered a cut in the reserve requirement (RR) ratio of banks, effective March 30, 2020, to boost lending as the government grapples with the Covid-19 outbreak.

The cut in the reserve requirement, by 200 basis points or two percentage points, allows banks to take out more money kept in the vaults and use them to offer loans to borrowers.

The Monetary Board authorized further loosening of monetary policy on Monday, after cutting the BSP’s policy rates by 50 basis points on March 20, 2020.

Diokno’s order covered only universal and commercial banks, but the BSP said “potential cuts on the reserve requirements for other banks and non-bank financial institutions will also be explored.”

“The RR cut is intended to calm the markets and to encourage banks to continue lending to both retail and corporate sectors. This will ensure sufficient domestic liquidity in support of economic activity amidst this global pandemic due to the Coronavirus Disease,” the BSP said in a statement.

“The BSP will have to assess the impact of Covid-19 on the broader economy,” before cutting reserve requirements further, Diokno said.

He said the “behavior of banks, particularly their capacity to absorb, invest, and lend the freed-up liquidity, will likewise be a determining factor for further adjustments.”

The country’s main shares index, which had sunk to 12-year lows, rose nearly 31 points or 0.65 percent to 4,774.27 on Tuesday. (