Bank Negara Malaysia (BNM) announced on 8 May 2025 that it would lower the statutory reserve requirement (SRR) ratio from 2% to 1% with effect from 16 May 2025, a move it said would release approximately RM19 billion of liquidity into the banking system.
The central bank said the reduction was part of its continuous efforts to ensure sufficient liquidity in the domestic financial system. "This will facilitate banks to better manage liquidity in an environment of greater financial market volatility and provide continued support for financial intermediation activity," BNM said.
The SRR sets the minimum reserves that banks must hold with the central bank, and a lower ratio frees funds that institutions can deploy elsewhere.
NOT A MONETARY POLICY SIGNAL
BNM said the SRR is an instrument to manage liquidity and not a signal regarding the monetary policy stance. "The Overnight Policy Rate (OPR) is the sole indicator used to signal the stance of monetary policy and is announced through the Monetary Policy Statement released after the Monetary Policy Committee meeting," it said.
Earlier the same day, the Monetary Policy Committee decided to maintain the overnight policy rate (OPR) at 3%. In its statement, the committee said tariff measures announced by the US and retaliations had weakened the outlook for global growth and trade, and that the balance of risks to Malaysia's growth outlook was tilted to the downside.
Headline and core inflation averaged 1.5% and 1.9% respectively in the first quarter of 2025, and the MPC said inflation in 2025 was expected to remain manageable. It added that, at the current OPR level, the monetary policy stance was consistent with its assessment of inflation and growth prospects.