NBC injects 238 bln riel into local banks through LPCO

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The National Bank of Cambodia has disbursed more than 238 billion riel, about $58.5 million, in the first half of the year through its liquidity-providing collateralised operation (LPCO).

A focus of the Central Bank is to promote the use of the local currency, the riel. KT

The LPCO mechanism aims to boost the country’s riel liquidity by providing credit in the local currency to commercial banks and microfinance intitutions.

According to NBC’s latest report, riel liquidity provided through LPCO during the first six months of the year was 2.6 times higher than during the same period last year.

Interest rates ranged between 2.6 to 3.07 percent, with about 282 billion yet to reach maturity, NBC said.

Eight financial institutions took advantage of the LPCO, double the amount than during 2017’s first half, it said.

In March 2018, the Central Bank created two additional maturities of three and six months to complement the existing one-year option.

The creation of the new maturities aims to help financial institutions comply with regulation that requires them to have at least 10 percent of their loan portfolio in riel. All banks must be in compliance with this requirement by the end of next year, according to a deadline set by NBC.

“NBC continues to expand the LPCO to meet the needs for liquidity in riel from banks and MFIs, while the interbank market has yet to begin actively pushing the local currency,” the report said.

NBC director-general Chea Serey said market demand for the riel is now 4 trillion ($1 billion).

“Besides the LPCO, we have also created a video explaining the importance of the riel, we have a ‘riel day’ in various universities, and are conducting research on the use of riels in the economy and strengthening the quality of the currency. We also run a programme that allows people to exchange old riels for new ones,” Ms Serey said.

Cambodia now has 40 commercial banks, 15 specialised banks, 7 microfinance deposit taking institutions, 70 microfinance institutions and 302 rural credit institutions, according to NBC.

This article was originally published in the Khmer Times.