Regulatory Alerts2022-05-13
Banking Circular No.1 of 2022 - Expiry of Cash Reserve Ratio Emergency Measure
The Central Bank of Kenya (CBK) has announced the expiry of the Cash Reserve Ratio (CRR) emergency measure that was implemented during the COVID-19 pandemic. This was part of measures taken to provide liquidity to banks and support borrowers impacted by the crisis. The emergency measure will expire on May 16, 2022, releasing an outstanding balance of Ksh.2.4 billion for utilization as needed. Banks are reminded to adhere to the daily CRR requirement of 3% and a monthly average CRR of 4.25%.
BANKI KUU YA KENYA Haile Selassie Avenue P.O. Box 60000 - 00200 Nairobi, Kenya Telephone: 2860000, Fax: 340192 May 13, 2022 BANKING CIRCULAR NO.1 OF 2022 TO ALL CHIEF EXECUTIVES OF COMMERCIAL BANKS, MORTGAGE FINANCE COMPANY AND MICROFINANCE BANKS EXPIRY OF CASH RESERVE RATIO EMERGENCY MEASURE On March 27, 2020, the Central Bank of Kenya (CBK) issued Banking Circular No.4 of 2020, to operationalize the Monetary Policy Committee (MPC) policy action of reducing the Cash Reserve Ratio (CRR) from 5.25 percent to 4.25 percent on March 23, 2020. The CRR reduction was part of emergency measures to cushion the banks against the adverse effects of the coronavirus (COVID-19) pandemic. The policy action released Ksh.35.2 billion additional liquidity to the banks to directly support borrowers that were distressed because of COVID-19 pandemic.
To access the additional liquidity, commercial banks, mortgage finance company and microfinance banks, submitted requests to CBK with the necessary supporting documents on how the borrowing to be restructured related to the impact of COVID-19. Between March 2020 and March 2021, banks utilized Ksh.32.8 billion (93.2 percent) of the total Ksh.35.2 billion. It is worth noting that the other emergency measures including loan restructuring and extension of loan repayment periods, have lapsed. Similarly, the COVID-19 containment measures by the government have been eased.
The purpose of this circular therefore is to inform commercial banks, mortgage finance company and microfinance banks that the CRR emergency measure expires effective Monday, May 16, 2022, and the outstanding balance of Ksh.2.4 billion has been released to the respective banks for utilization as needed.
All commercial banks, mortgage finance company and microfinance banks are reminded that they should always observe the daily CRR requirement of 3 percent and monthly average CRR of 4.25 percent.
Yours faithfully,
cama GERALD NYAOMA DIRECTOR, BANK SUPERVISION Mr. Habil Olaka Chief Executive Officer Kenya Bankers Association International Life House, Mama Ngina Street NAIROBI Cc: Ms. Carol Karanja Chief Executive Officer Association of Microfinance Institutions in Kenya Methodist Ministries Centre, 1st Floor, Right Wing P.O. Box 10701-00100 NAIRORI