Excess cash reserves held by banks fell below the statutory minimum set by the Central Bank of Kenya for the first time in eight months as liquidity tightened in the money market.
The banks’ excess reserves fell Sh1.5 billion below the statutory 5.25 per cent threshold or more than Sh130 billion, the lowest it has been since early February when it fell Sh5.6 billion below the required amount according to the CBK weekly bulletin.
“Due to the tight liquidity conditions at the beginning of the CRR cycle which started on October 15, 2017, the commercial banks’ excess reserves above 5.25 percent averaging requirement had a short fall of Sh1.5 billion,” the regulator said.
The reserves have been on a steady decline since mid-August when they reached a high of Sh19 billion above the benchmark level.
The central bank has been mopping shillings from the market in recent weeks, using repurchase agreements, to give the local currency support by making it expensive to sit long on the dollar and other foreign currencies.
Foreign exchange traders said last week the bank also sold dollars in a bid to stabilise the shilling amid heightened political activity ahead of the October 26 fresh presidential elections.