Monetary Policy

Instruments of Monetary Policy

Reserve Requirements

The statutory reserve requirement stipulates the minimum balance designated financial institutions are required to maintain with the Bank of Guyana as reserves against their deposit and other liabilities.  This requirement is determined by the Bank and may be changed as part of its policy.

The statutory reserve requirement remains an important instrument of monetary control and financial prudence in Guyana.  However, its utilization is limited to the implementation of what can be considered the long term objectives of the Bank’s policy.  The more flexible open market operations are adopted for implementing short- and medium term policy of the Bank.

 With effect from the reserve base period which commenced February 01, 1999, the statutory reserve requirement ratio applicable to all liabilities (demand, time and savings liabilities, whether domestic or foreign) of deposit-taking institutions was lowered to 12 per cent from 14 per cent of time liabilities and 16 per cent of demand liabilities held by banks.  Effective January 01, 2000, requirements were established for non-bank deposit-taking financial institutions.  These institutions were required to maintain a minimum deposit (reserve) balance with the Bank of 4 per cent of total liabilities. This was incrementally increased by 2 percentage points every six months until convergence with the ratio of 12 per cent applicable to commercial banks was achieved (in January 2002).  The Income Tax (Amendment) Act No. 6 of 2000 amended the  Principal Act to exempt (with the approval of the Minister) financial institutions licensed under the Financial Institutions Act which are designated as mortgage finance companies from meeting the reserve requirement mentioned in section 41 of the Bank of Guyana Act 1998, in relation to liabilities used for mortgage financing.