Cash reserves held by commercial banks above the statutory requirement hit a fresh high of Sh41.3 billion, pointing to increased liquidity after lowering of threshold by a percentage point three weeks ago.
Banks are now required to maintain a daily average of 4.25 percent of their total deposits in their accounts with the Central Bank of Kenya (CBK) for a month.
The growth in excess cash over the minimum levels set by the CBK to the highest value this year partly points to depressed lending by banks since the measure was taken to provide more funds for borrowing.
CBK’s top decision making organ, the Monetary Policy Committee (MPC), on March 23 slashed the cash reserve ratio (CRR) for commercial banks from 5.25 percent after the reserves had fallen to a fresh low of Sh3.2 billion in the week ended March 19.
The cut on the threshold for the first time since 2008, when the country faced the twin shocks of global financial crisis and deadly post-election skirmishes, freed up Sh35.2 billion for lending to homes and businesses.
The CBK says in its latest weekly update that cash held by banks above the CRR had risen to Sh41.3 billion by last Thursday compared with Sh39.7 billion a week earlier and Sh38.8 billion in the week ended March 26.
“The money market was liquid during the week ending April 9, largely supported by government payments, which offset tax receipts. Commercial banks’ excess reserves stood at Sh41.3 billion in relation to the 4.25 percent cash reserves requirement (CRR),” the CBK writes in the report.
This comes ahead of the quarterly tax payment month when most corporates, including the banks, remit dues to the Kenya Revenue Authority (KRA), effectively lowering liquidity in the banking system.
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