The Bangko Sentral ng Pilipinas (BSP) has determined that the inflation and liquidity dynamics is such that the monetary board reduced the banks’ reserve requirement ratios (RRRs) by 200 basis points (bps) beginning 28 March 2025.
The reduction, announced Friday, applies on funds of the various universal and commercial banks (U/KBs) and non-bank financial institutions with quasi-banking functions (NBQBs) held in reserve in the vaults of the BSP. This also means a150 bps deposit reserve reduction for digital banks and 100 bps for thrift banks (TBs).
The reduction shall bring the RRRs of U/KBs and NBQBs to 5.0 percent; digital banks to 2.5 percent; and TBs to 0.0 percent. The new ratios shall take effect on the reserve week beginning on 28 March 2025 and shall apply to the local currency deposits and deposit substitute liabilities of banks and NBQBs.
Economists have calculated that each point percentage cut in the banks’ deposit reserves releases the equivalent of P150 billion into the economy. The decision reducing the reserves by 200 basis points redounds to flooding the monetary system with P300 billion that the various lenders deploy as additional loan funds.
The BSP reiterates its long-run goal of enabling banks to channel their funds more effectively toward productive loans and investments. Reducing RRRs will lessen frictions that hinder financial intermediation.
