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NBC holds RRR at 7% for Q4

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The National Bank of Cambodia (NBC). Hean Rangsey

NBC holds RRR at 7% for Q4

The National Bank of Cambodia’s (NBC) Monetary Policy Committee (MPC) has maintained the reserve requirement ratio (RRR) at seven per cent for both KHR- and USD-denominated deposits, to help stabilise prices and enhance the efficiency of monetary policy in the fourth quarter of this year.

RRRs are central bank regulations that set a minimum amount of cash that financial institutions must hold in reserve. The Cambodian RRRs for foreign and domestic currency deposits were 12.5 per cent and eight per cent, respectively, until the NBC reduced both to seven per cent in March last year.

Cambodia Microfinance Association (CMA) spokesman Kaing Tongngy noted that the RRRs were once over 10 per cent, and said the MPC’s decision to cut the rates to seven per cent helped banks and microfinance institutions have extra cash to provide credit to customers.

"Once we reopened the economy, the demand for credit and cash increased, so now that the NBC allows institutions to hold even less in reserve, it means that they’ll have more money on hand to give credit to those who need to reopen their businesses," he told The Post on November 17.

The MPC has also revealed a set of other near-term decisions, such as using currency interventions as necessary to stabilise exchange rates, the NBC said in a statement.

The committee aims to keep interest rates of liquidity-providing collateralised operations (LPCO) – a financial tool that allows NBC to lend to financial institutions in the local currency – and marginal lending facilities (MLF) at “appropriate levels”.

It also seeks to reinforce liquidity in riel through other LPCO mechanisms to meet demand from banking and financial institutions, and increase awareness and facilitate the use of MLFs, according to the central bank.

The NBC previously noted that MLFs offer riel-denominated overnight loans that can be extended to a period not exceeding five days, and said it accepts negotiable certificates of deposits (NCD) as collateral.

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