Bangko Sentral ng Pilipinas 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.
At an official estimate of about P100 billion per 100-bps cut, the cumulative reduction on buffer funds would unleash P400 billion to the economy by December, an amount nearly matching this year’s P454.09-billion budget of the Department of Public Works and Highways.
In a statement, the central bank said its policy-making Monetary Board approved on Thursday a 100-basis-point (bps) reduction in bank reserve requirements to “increase domestic liquidity in support of credit activity.”
Billions of pesos in bank reserves made available by the central bank for borrowers have so far proven ineffective in accelerating lending, providing another indication that second-quarter economic growth would likely disappoint when reported next week.