Question

08 Nov 2019 - Bank Negara Malaysia wishes to announce that the Statutory Reserve Requirement (SRR) Ratio will be lowered from 3.50% to 3.00% effective from 16 November 2019. Explain why and what will be the impact to domestic business activities? Support your discussion with the facts and data from Malaysia.

Answer 1

Answer - As the SLR requirement has been decreased , the banks will have to keep a lower amount of the deposits as the reserve . Hence the bank will have more amount of money to lend. Due to this decrease , the interest rates will also decline. Hence the domestic business will be able to borrow the amount at lower interest rates , there costs will decline hence they will be able to expand their level of production. This will lead to their flourishment .