KUALA LUMPUR (Jan 21): Bank Negara Malaysia has maintained the overnight policy rate (OPR) at 3.25% — as has been widely expected — but surprisingly announced that it is reducing the statutory reserve requirement (SRR) ratio to 3.5% from 4%, effective Feb 1 — the first reduction in the SRR since 2011.

In a statement, Bank Negara said the move to reduce the SRR ratio was part of a "comprehensive effort" by the central bank to ensure sufficient liquidity in the domestic financial system and to support the orderly functioning of the domestic financial markets.

"Since early 2015, Bank Negara Malaysia has relied on its monetary operations, including the reverse repo (reverse repurchase agreement) facility, to provide liquidity to the banking system as net external outflows reduced the amount of liquidity in the system," it said.

"As at Jan 21, 2016, this has amounted to RM40 billion," it added.

However, the central bank said the SRR ratio should not be construed as a signal on the stance of monetary policy, as it is only an instrument to manage liquidity.

The OPR is the sole indicator used to signal the stance of monetary policy, and is announced through the monetary policy statement released after the Monetary Policy Committee meeting.