Thursday, January 22, 2009

Interest rates reduced by 75 basis points

It is heartening that Bank Negara has finally acted to reduce the Overnight Policy Rate (OPR). To reduce it  by 75 basis points or 0.7%, signals a serious intent to meet the threat of economic contraction head-on.

The implication of an OPR reduction is the reduction of the Base Lending Rates (BLR) of banks, making bank borrowings cheaper.

The idea is, of course, to provide greater liquidity for commercial and other economic activities.

SRR also reduced
The Statutory Reserve Requirement (SRR) for banks has also been reduced from 3.5% to 2%. Again, this signals clear intent by Bank Negara to provide banks with additional liquidity for borrowers.

Good moves
These are important economic policy measures and, not a moment too soon.

Will the banks lend more aggressively?
Now the challenge will be to encourage banks to adopt a more conscientious approach to loan applications. For the economic managers, this will be the next arena for battle in the continuing war to keep the economy on a positive and even keel.

2 comments:

bangkai said...

Hmmm... Bank Negara has set the stage and now the baton is in the bankers hand.

I'm going to be a cheerleader and cheer these people into running like they have never run before.

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