Reserve Bank increases bank quotas

The South African Reserve Bank will increase the amount of excess cash commercial lenders can hold with it and earn interest in a move toward paying the National Treasury a portion of the surplus profits from the Gold and Foreign Exchange Contingency Reserve Account.

Finance Minister Enoch Godongwana, in his February budget, indicated that the Treasury will restructure the account held at the central bank to free up R150 billion over three years, starting with R100 billion in the year through March 2025 to pay down government debt.

Paper profits in the account, which reflects gains in the value of the central bank’s stock of gold, foreign exchange, and forwards or swaps agreements, stood at R507.3 billion in January.

Lenders will be able to gradually increase their excess cash holdings with the Reserve Bank from July 1 to Aug. 19 for which they will be paid interest at the policy rate, SARB said in a statement on Tuesday.

Those that exceed the quotas will earn the policy rate less 100 basis points, it said.

The central bank had previously indicated that it would replace a portion of the GFECRA liability on its balance sheet with bank reserves rather than selling the underlying assets to finance the distribution to the Treasury.

It also said that it would use a range of tools to manage the liquidity to prevent it from becoming inflationary.

It said Tuesday that the liquidity surplus would be doubled to an average of 160 billion rand, moving in increments of 10 billion rand per week.

“Although the total distribution to the National Treasury is R100 billion this year, R20 billion will be drained separately via the Corporation for Public Deposits, an operation that is money-market neutral.

This is why the liquidity surplus rises by 80 billion rand and not 100 billion rand,” the central bank said.