Cash reserves held by commercial banks above the statutory requirement hit an 11-week high last week as lenders prepared to clear taxes, fresh data shows.
Banks are required to maintain an average of 5.25 per cent of their total deposits daily in their accounts at the Central Bank of Kenya (CBK) for a month that ends on 14th. The cash is technically referred to as Cash Reserve Ratio (CRR).
Last week, they exceeded the CRR by Sh10.4 billion, a sharp rise from the Sh4.4 billion the previous week. It was also the highest level since the week ended September 13 when they stood at Sh10.7 billion.
“This may be attributable to the fact that banks were accumulating liquidity to meet tax payment obligations that were due on November 20,” the CBK said in its weekly bulletin.
The banks breached the CRR guideline in the week ended October 18 when their reserves dropped Sh1.5 billion below the threshold due to limited cash circulation.
The lenders paid Sh32.8 billion in taxes in five working days to November 22, leading to a net balance between cash that was injected into the market and that withdrawn.
About Sh64.6 billion was pumped into the market, largely comprised of bond redemptions at Sh27.9 billion and government payments (Sh23.9 billion).