Required reserve ratio should be cut

It is a possibility that the required reserve ratio for hard currency deposits will be lowered soon. HCM City branch of the central bank has recently proposed that the central bank reduce the current required forex reserve ratio from 8% to 5%. In response, the central bank said it needs to consider the extent of reduction and the appropriate time to do so.

Commercial banks, on their part, said now is the right time to cut the required reserve ratio. The reduction will first help to increase US dollar supply to the market which is important now as the national trade deficit is on the rise at US$1.140 billion in the first seven months-nearly a billion dollars more than the year-earlier period.

In addition, a lower ratio would help banks to have more US dollar funds for lending. Given the current drop of US dollar interest rates, higher US dollar liquidity is important for banks.

 

Category: Finance