The Central Bank has reduced the Statutory Reserve Ratio (SRR) applicable for commercial banks (LCBs) and has introduced a new credit scheme to revive the economy, following a meeting with President Gotabaya Rajapaksa yesterday. Accordingly, the Monetary Board of the Central Bank  has decided to reduce the Statutory Reserve Ratio (SRR) applicable on all rupee deposit liabilities of licensed commercial banks (LCBs) by 200 basis points to 2.00 per cent, with effect from the reserve maintenance period that commenced on 16 June 2020. "This reduction in the SRR injects around Rs. 115 billion of additional liquidity to the domestic money market, enabling the financial system to expedite credit flows to the economy, while reducing the cost of funds of LCBs," CBSL said. "With today’s decision, the Central Bank has reduced the SRR by a total of 300 basis points thus far during 2020, in addition to several other easing measures implemented already, including the reduction of policy interest rates by a total of 150 basis points and the reduction of the Bank Rate by 550 basis points." "The financial sector is expected to pass the benefit of the high level of liquidity and the reduced cost of funds to the economy without delay, by increasing lending to businesses and households at low cost. The Monetary Board will continue to monitor economic and financial market developments and will take further policy and regulatory measures to support a sustained revival of economic activity in the period ahead." "Growth of the Sri Lankan economy has fallen to dismal levels over the past few years, and the impact of the COVID-19 pandemic may result in severe stress on economic and financial system stability in the period ahead unless immediate remedial actions are taken. In this context, in support of the government’s efforts to revive the economy, the Monetary Board has decided to introduce new credit schemes under the Section 83 of the Monetary Law Act No. 58 of 1949." "Accordingly, in addition to the already disbursed Rs. 27.5 billion under the refinance scheme introduced on 27 March 2020, the Central Bank will provide funding to Licensed Commercial Banks (LCBs) at the concessionary rate of 1.00 per cent against the pledge of a broad spectrum of collateral, on the condition that LCBs in turn will on-lend to domestic businesses at 4.00 per cent, while ensuring the greatest possible distribution of this facility. This scheme along with the existing refinance Scheme will provide Rs. 150 billion in total to the businesses affected by the COVID-19 pandemic." "In addition, the construction sector enterprises will be provided with a facility to borrow from LCBs, using guarantees issued by the government equivalent to the amount due on account of contracts carried out in the past, under a new dedicated credit scheme funded by the Central Bank and made available at the aforementioned concessionary rates." The Central Bank said operating instructions on these new credit schemes will be issued in immediate due course.