Banking and Finance industry insiders welcomed the new measures of the National Bank of Cambodia (NBC) which allow banks and other financial institutions to have stronger liquidity and to continue lending to the private sector amid the COVID-19 pandemic.
The Cambodian Central Bank on Tuesday announced several new measures to facilitate and urge financial institutions to have stronger liquidity. The move aims to reduce the base cost of capital for each financial institution, enabling it to have enough liquidity to help it to decide whether to accept delayed payments from the customers.
The NBC will delay the implementation of the Capital Conservation Buffer (CCB) until next year, reduce the interest rate on the Liquidity-Providing Collateralised Operation (LPCO) up to 0.5 percent and decrease the interest rate for the Negotiable Certificate of Deposits (NCD).
In addition to this, the NBC also reduced the interest rate of the reserve requirement to 7 percent for both local and foreign currencies for six months starting from April 2020. Before the interest rate on reserve requirement was 8 percent for riel and 12.5 percent for foreign currencies. It will reduce the liquidity coverage ratio (LCR) to an appropriate level if it is necessary.
Say Sony, senior vice-president and chief marketing management of PRASAC MFI, welcomed the move. He gave thanks to the NBC for its preparedness and response to help banking sector liquidity.
“We believe that the NBC’s measures will help increase liquidity and will make more funds available for lending. In a situation like this, we, as the financial institution, prepared and increased our liquidity to the highest level in order to make sure that we have sufficient liquidity to respond to this situation,” Say said.
“We are following the NBC’s statement by continuing to lend to priority sectors and other sector as well. Regarding clients who are directly affected, we will discuss with them and make a case-by-case based on the actual situation of the clients,” he added.
Say said that his loan portfolio has yet been affected by the spread of COVID-19. “Our loans are small and not many clients are affected by this situation yet. However, we are closely monitoring our non-performing loans,” Say added.
“We are continuing to lend to our clients who need money for their businesses. We keep educating clients and staff to prevent them from catchingCOVID-19,” he added.
The Cambodia Microfinance Association (CMA) has welcomed all the measures issued by the National Bank of Cambodia and believes these measures will contribute to reducing the impact from the Covid-19 to the banking and finance sector and the economy as whole, according to Cambodia Microfinance Association’s Chairman Kea Borann.
“As of now, the microfinance situation remains normal with the trend of loan proposal, and outstanding deposits remaining solid. Although the Association, as well as its members, are monitoring closely all developments for the sector.”
“The CMA is also calling on all members to exercise flexibility in dealing with issues regarding loan repayments from customers affected by COVID -19. Each institution has its own policy to deal with customer issues through proper procedure and actions,” he added.
A directive released yesterday, signed by NBC Governor Chea Chanto, on the Reserve Requirement of the Deposit and Loan for Banking and Finances, said that it is to allow banking and other financial services to provide more lending to customers.