BSP to cut RRR by up to 250 bps starting Oct 25

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. confirmed on Wednesday that the central bank plans to reduce banks' reserve requirement ratio (RRR) by 250 basis points for universal and commercial banks, bringing it down to 7% as of October 25.

The RRR will also be reduced by 200 bps for digital banks; 100 bps for thrift banks (TBs); and 100 bps for rural banks and cooperative banks (RCBs), with TBs' RRR dropping to 1% and RCBs' RRR reaching 0%. These adjustments are part of the BSP's efforts to reduce distortions in the financial system.

The reductions will lower intermediation costs, promote better pricing for financial services, and align RRR levels with regional norms over the medium term as inflation continues to track a target-consistent path.

Experts estimate that this cut will inject around P150 billion per 1 percentage point reduction or approximately P375 billion into the economy, potentially boosting economic growth by increasing demand for loans and stimulating investment in financial markets.

With these reductions, banks will have more capital available for lending, which can encourage economic activity and support price gains across various sectors.