The Monetary Policy Board has decided to relax the restrictions on the Standing Facilities to Licensed Commercial Banks (LCBs), following a review of market developments and improved liquidity conditions.
Effective from 16-Feb-24, the restriction on the Standing Lending Facility (SLF) will be lifted, and the limit on access to Standing Deposit Facility (SDF) access will double from 5 times per month to 10 times per month.
In Jan-23, CBSL imposed restrictions on Standing Facilities for LCBs, to reduce their overdependence on overnight facilities, reactivate the domestic money market, and prompt them to introduce internal corrective measures.
Access to the SDF was limited to 5 times per calendar month, while access to the SLF was capped at 90% of the Statutory Reserve Requirement of each LCB on any given day.
It was reported that these initial restrictions have produced positive outcomes, reactivating the money market, mitigating excessive competition for deposit mobilization among banks, and aligning market interest rates with CBSL's monetary policy stance, all while ensuring financial system stability.
CBSL now expects that this relaxation will further stimulate interbank lending and borrowing, accelerating a decline in market interest rates in line with its monetary policy direction
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