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Private banks may face a liquidity crisis due to the junta’s new banking regulations

Private banks have raised concerns after the junta’s Central Bank of Myanmar (CBM) recently announced that they must deposit 2.5 percent of their cash reserves at the CBM and 0.5 percent of all money stored at private banks must be kept as cash. 

Before the new directive, banking industry experts say that only 2.25 percent of cash had to be deposited at the CBM, and the remaining 0.75 percent could be retained by the banks as cash.

Therefore, banking industry experts suggested that the CBM’s new orders are aimed to reduce the amount of cash held by banks. “To be clear, the Central Bank is saying that it is not reliable to keep cash in your [the private banks] hands…I think the Central Bank’s purpose is to give itself more cash than it previously had,” a banking expert told DVB. If a bank refuses to comply with the orders, the CBM has warned that it will have to pay a fine. 

“When the decision is enacted to keep 0.25 percent more [cash] than the previously set amount at the Central Bank, it may cause [private] banks to have a liquidity crisis,” another expert in banking and finance said.

Burma’s banking sector has been in crisis since the military coup. Banks have recently eased regulations on cash withdrawals, but people in the country have been still experiencing cash withdrawal restrictions.

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