Bank Negara Malaysia (BNM) said today that it will cut the statutory reserve requirement (SRR) ratio to 3.5 percent from four percent, beginning Feb 1.

"The decision to reduce the SRR is undertaken as part of a comprehensive effort by BNM to ensure sufficient liquidity in the domestic financial system, and to support the orderly functioning of the domestic financial markets," the central bank said in a statement.

The central bank added it has relied on its monetary operations, including the reverse repo facility, to provide liquidity to the banking system as net external outflows reduced the amount of liquidity in the system. As of Jan 21, this amounted to RM40 billion, it noted.

The SRR is a monetary policy instrument to manage liquidity and credit creation in the banking system.

BNM held its key policy rate steady at 3.25 percent.

- Reuters