Saturday, November 7, 2009

Sada Reddy's SRD Increase sounds fishy!!!

Well this sounds interesting!!!??? But I do stand to be corrected if I misunderstood the situation, but I'll mention it anyway.

So, the banks' liquid assests are on the increase, which means they are giving away more to customers than ever before. Now this for me just doesn't sound right, especially for a country like Fiji, with our current tumultous situation and the global financial crisis. Are the people of Fiji really able to pay-off loans (which make part of this liquid assests) even though most of them have lost their jobs, children can't go to school for lack of bus fares and fees, etc etc.

What Mr. Reddy fails to mention though, according to my research is that "the SRD, or Statutory Reserve Deposit, was used for monetary policy purposes. For instance, the SRD would be lowered if the Government wanted to put money into the economy and raised to withdraw money from the economy. (Barry Clarke-

Ok...if this is the case, then what's the WITHDRAWAL FOR???? HMMMMMMM...MR. REDDY, PLEASE, EXPLAIN.

Reserve bank increases SRD levels
Publish date/time: 07/11/2009 [17:04] (Fijivillage)

The Reserve Bank has increase the Statutory Reserve deposit to all commercial banks from 5% to 7% effective from today.

Reserve Bank Governor Sada Reddy said all banks are required under Section 40 of the Reserve Bank Act to hold a proportion of their deposits and similar liabilities with the Reserve Bank.

He said that there has been a significant build up in system liquidity since April 2009, and the amount of liquidity in the banking system has been on an upward trend, rising significantly in the Septmember quarter by around $170 million to around $350 million from levels of below $30 million in early April.

Reddy said the SRD is expected to supplement recent measures taken by the Ban to ensure that liquidity in the banking system is maintained at an acceptable level while safeguarding Fiji's foreign reserves.

He adds the bank liquidity expected to remain above $200 million and this should not put any upward pressure on interest rates.

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