Myanmar: Increase in Interest Rate on Excess Reserve Funds

On March 21, 2025, the Central Bank of Myanmar (CBM) issued an order revising the interest rate on average excess reserve funds held in Myanmar Kyat (CAB) above the minimum reserve requirement. This decision, made during the Monetary Policy Committee Meeting (1/2025) on February 28, 2025, aims to enhance bank liquidity, stabilize the banking sector, and ensure an accurate interest rate structure.

Key updates include:

Increased Interest Rate: The interest rate on average excess reserve funds has been raised from 3.8% to 6%.
Eligibility Requirements: Banks must maintain an average excess reserve in the range of 7 billion Kyat to 50 billion Kyat, to qualify for interest payments.
Periodic Review: CBM will periodically adjust the minimum and maximum reserve thresholds and the interest rate based on market conditions.
Interest Calculation and Payment Date: Interest will be calculated based on the last day of the maintenance period and credited to banks’ accounts on a T+2 basis. Payments will start from March 26, 2025, covering the maintenance period until April 22, 2025.
Applicability: These adjustments apply uniformly to state-owned banks, private banks, and foreign bank branches operating under retail banking service licenses.

Previous Notifications (2023 & 2024)

To provide context, CBM had previously addressed reserve requirements and excess reserve interest rates through Directive No. 4/2024, issued on April 30, 2024. This directive replaced Directive No. 9/2023 and its related order letter from April 5, 2023.

Under Directive No. 4/2024:

CBM increased the minimum reserve requirement ratio for banks in Myanmar Kyat from 3.5% to 3.75%, with 3% held as deposits at CBM and 0.75% as cash.
The interest rate on average excess reserves was set at 3.8%, applicable to excess reserves between 7 billion Kyat and 50 billion Kyat.
Banks were required to comply with these new thresholds by the last day of each maintenance period to avoid penalties.

The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.