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What is OPR?

The OPR, overnight policy rate is the interest rate at which financial institutions lend money to one another overnight and is established by Bank Negara Malaysia (BNM), our central bank.

Banks frequently have fluctuating amounts of cash on hand due to their lending activities, as well as the deposits and withdrawals of their clients.

That means if everyone is withdrawing their money on the same day, the banks might need to ask another banks to loan them some cash money to keep an appropriate cash reserve.

Although it may appear to be deft cash juggling, the requirement for lending money between banks is a well-established and crucial component of an efficient financial system. Since lending is a key component of a bank’s business, maintaining a balance between their available cash reserves is essential to meeting the BNM’s liquidity criteria.

The OPR-defined bank interest rates serve as the framework for monetary policy on a national scale, ensuring that banks have a steady supply of cash on hand.

Changes in the OPR rate frequently have an impact on a variety of other economic parameters beyond only lending rates because the OPR is so essential to the operation of our banking system.

As in employment and the impact of price inflation on the cost of goods.

Bank Negara Malaysia has announced that the OPR would be updated at a rate of 2.50% as of September 2022, an increase of 0.25% from the previous rate of 2.25% from July.

The OPR was decreased as a result of the COVID-19 pandemic to better assist the economy. However, the Monetary Policy Committee (MPC) of BNM has “agreed to begin reducing the degree of monetary accommodation” in accordance with their official statement given the reopening of global markets and solid domestic development.

Although it could initially seem frightening, BNM ensures that it would be implemented in a measured and gradual manner to support the country’s sustained economic growth in a setting of price stability.

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Reference:

https://www.propertyguru.com.my/property-guides/what-is-overnight-policy-rate-opr-malaysia-14728

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