Following the Military Coup that took place on the 1 February 2020 in Myanmar, the Central Bank of Myanmar ("CBM") has issued a number of directives with the aim of controlling cash flow and keeping the country's economy from collapsing.
Reduction of Minimum Reserve Requirement for Banks
CBM issued a notification on the 3.5% minimum reserve requirement for banks in mid-February. This has been further reduced under latest Reserve Requirement Directive on 7 May 2021 to 3% until 30 September 2021 to help free up more funds for the banks to meet the demand of their customers wishing to withdraw funds. The significance of the impact of this reduction remains to be seen as it depends on the customers and the public in general and whether they decide to continue to withdraw funds from their accounts.
Limit cash withdrawals at ATMs and bank branches
A letter urging businesses to use digital payment infrastructures was issued in March with a limit on cash withdrawals at ATMs of MMK 500,000 daily, and a limit at bank branches of MMK 2,000,000 for individuals and MMK 20,000,000 for companies per week. However, since the beginning of June, some banks are experiencing cash shortage, and there have been cases of customers being able to withdraw only MMK 500,000- MMK 1,000,000. Most ATMs also remain out of cash with banks being unable to top up ATMs due to cash shortage.
The severe cash shortage in Myanmar has caused many businesses and individuals to face financial difficulties. This has also led to a few individuals within the banking industry taking commissions of up to 12% for cash withdrawn by the bank customers. In that regard, CBM issued a warning via a letter dated 15 April 2021 to banking staff and certain individuals hoarding and selling cash to those in need during the ongoing currency shortage. The letter states that such activity violates Section 99(b) of the Central Bank of Myanmar Law, which is punishable, on conviction, with a fine and/or imprisonment for a term not exceeding two years.
