Bank reserve deposits raised to boost liquidity

November 07, 2009 10:35:08 AM

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Commercial banks in Fiji will have to increase the proportion of their deposits held with the Reserve Bank of Fiji (RBF) from next month as part of measures by the central bank to support growing liquidity and foreign reserve levels.

The RBF board decided at a meeting this week to increase the Statutory Reserve Deposit (SRD) requirement from five percent to seven percent effective December 7.

All licensed commercial banks in Fiji are required under Section 40 of the Reserve Bank Act to hold a proportion of their deposits and similar liabilities with the RBF.

“Raising the SRD is expected to supplement recent RBF measures to ensure liquidity in the banking system is maintained at an acceptable level while safeguarding Fiji’s foreign reserves,” said an RBF statement.

“The amount of liquidity in the banking system has been on an upward trend, rising significantly in the September quarter by around $170 million to around $350 million from levels of below $30 million in early April,” said RBF Governor Sada Reddy.

With bank liquidity expected to remain above $200 million, there should not be any upward pressure on interest rates, said Reddy.

He urged banks to “utilise the ample funds available, to lend to priority sectors which will support growth, exports and investment”.