The decision to raise the Statutory Reserve Requirement by 100 basis points to 4.00 per cent effective July 16, is unlikely to have any visible impact on the credit growth of banks, according to research.
SK Research pointed out that the move is similar to the increase in interest rates from record lows in early 2010, which did not stifle loans growth.
"Given that we expect the gross domestic product growth to remain intact at 5.6 per cent for 2011, and the current system Loan-to-Deposit Ratio of 84 % is still off the optimum 90 % to 92 % level that most banks are comfortable
with, we believe any increase in SRR, even to six per cent is unlikely to hamper loans growth," the research house said.
However, OSK Research said, the 100 basis points increase in SRR to four per cent is only expected to negatively impact the earnings of banks under its coverage by an average of 1.1%.
OSK Research maintains the "overweight" call on the banking sector and its top picks are CIMB and Maybank.
The full story is available at Bernama.
Do you know more about this story? Contact us anonymously through this link.