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April 19, 2024

Alternative Compliance to RR rule generates P254B loans to MSME

Banks release a total of P254 billion for micro, small and medium enterprises (MSMEs) in 2022 as alternative compliance to the central bank’s reserve requirements (RR) rule.

As part of its pandemic relief measures, the Bangko Sentral ng Pilipinas (BSP) allowed banks to use loans to MSMEs as RR compliance which concluded in the week ending in Dec. 29, in the previous year.

MSME loans generated as an alternative compliance to the RR rule was 7.7 percent higher compared to the figures seen at the end of 2021, which amounted to P235.8 billion.

The MSME loans also constituted 15.3 percent the total required reserves for the covered reserve week.

First implemented on April 24, 2020, for MSMEs, the central bank expanded implementation to include large enterprises not affiliated with conglomerated by May 29 of the same year.

Aggregate limits for MSME loans and large enterprises are P 300 billion and P 425 billion, respectively.

Reserve requirements signify he percentage of bank deposits and deposit substitute liabilities that banks must set aside in deposits with the BSP.

Banks cannot lend these reserves out, or where available through reserve-eligible government securities.