Bank Negara Malaysia announces reduction in statutory reserve requirement

28 July 2025

On 15 May 2025, Bank Negara Malaysia (“BNM”) issued the Policy Document on Statutory Reserve Requirement (“SRR”) which provides that, effective 16 May 2025, the SRR rate for banking institutions will be reduced from 2% to 1% of eligible liabilities (“EL”). The adjustment is part of BNM’s ongoing efforts to ensure sufficient liquidity in the domestic financial system. This will facilitate banks to better manage liquidity amid increased financial market volatility and provide continued support for financial intermediation activities.

The SRR Policy Document applies to licensed banks and licensed investment banks, as defined in the Financial Services Act 2013, as well as licensed Islamic banks, as defined in the Islamic Financial Services Act 2013. These banking institutions are required to maintain balances in their Statutory Reserve Accounts (“SRA”) of at least 1% of their EL. They are also required to comply with the SRR at two levels:

• Fortnightly: The average daily balances in the SRA from the 1st to the 15th, and from the 16th to the last day of each month, must be at least equal to the SRR rate.
• Daily: Balances maintained in the SRA must be within the 20% variation band around the prevailing policy rate (balances below the band are not permitted, and balances exceeding the band’s ceiling will not count towards meeting the fortnightly average requirement).

Any banking institution that fails to meet the minimum SRR requirement shall be liable to penalties.