The decision by the Monetary Policy Committee (MPC) of the Reserve Bank of Malawi (RBM) to slash the Liquidity Reserve Requirement (LRR) has instantly made available K12 billion into the banking system.
The Bankers Association of Malawi (BAM) says the development will ease liquidity pressures on banks, making more funds available to them.
On Friday, RBM Governor Dalitso Kabambe, who also chairs the MPC, announced that the second MPC meeting of 2020 pushed LRR downwards by 125 basis points to 3.75 percent.
LRR is a percentage of total deposits that commercial banks are mandated to keep with the central bank.
Kabambe said the measures should compel commercial banks to reduce lending rates and bolster cash flow of both businesses and households.
The MPC also resolved to cut the Lombard Rate—the rate at which commercial banks borrow from the central bank—by 50 percent to 0.2 percentage points above the Policy Rate.
BAM chief executive officer Lyness Nkungula told Business News on Saturday that the decisions have made more funds available to the banks for lending to companies and individuals.
Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer Chancellor Kaferapanjira said in an interview the private sector has high hopes and is keen to see positive outcomes from the measures and to see RBM continuing to monitor commercial banks.