Central Bank takes new step to boost lira deposits

ANKARA

The Central Bank has announced a new measure to increase the share of Turkish Lira deposits and support the transition from FX-protected deposits to Turkish Lira deposits.

Reserve requirements of eligible deposit banks maintained for their Turkish lira deposit and FX-protected deposit accounts with a maturity longer than one month will be subject to remuneration every three months, the bank said in a statement on its website early on Feb. 5, adding that it aims to strengthen the monetary transmission mechanism.

On the other hand, participation banks will be provided with a discount on the amount of their Turkish Lira reserve requirements to ensure a similar effect, according to the statement.

Last week, the Central changed reserve requirement ratios in a move that aims to encourage a shift to Turkish Lira deposits.

The reserve requirement ratios for FX-protected accounts with maturities of up to six months were reduced from 30 percent to 25 percent.

FX-protected deposit accounts, known as KKM which was introduced in December 2021, have been declining since the Central Bank decided to roll back the KKM scheme in August last year.

FX-protected deposits, which stood at 3.4 trillion liras in mid-Aug 2023, fell to 2.46 trillion liras in the week ending Jan. 26, according to the data from Banking Regulation and Supervision Agency (BDDK).