The key prudential regulations currently in effect are:
Overview
 |
Monetary
Measures  & Prudential  |
| a. | Pursuant to Law 9/85 of 27 June 1985, all commercial banks operating in the Maldives are required to pay a profit tax of 25 percent. |
| b. | With effect from 1 July 1985 all commercial banks operating in the Maldives are required to adhere to the foreign currency buying and selling rates published by the MMA. |
| c. | With effect from 9 August 1992, the Minimum Reserve Requirement (MRR) for commercial banks has been set at 35 percent of total rufiyaa and foreign currency demand and time liabilities. Balances of the minimum reserve deposits in excess of 15 percent bear interest at the rate of 2.5 percent per annum. The reserve requirement for rufiyaa has to be met in the form of rufiyaa deposits, while for foreign currency, US dollar deposits are required. |
| d. | With effect from 1 June 1995, MMA commenced its Certificates of Deposit programme, with participation limited only to banks. With effect from 23 Aug 2001, participation in the CD programme was widened to include state owned enterprises on the same terms, as banks. |
| e. | With effect from 24 June 1995, commercial banks are free to determine the annual rates of interest chargeable on loans and advances and the annual interest payable on deposits denominated in US dollars. |
| f. | With effect from 24 June 1995, banks are free to determine the annual rates of interest chargeable on loans and advances and the annual interest payable on deposits denominated in rufiyaa, such that rates on loans do not exceed 20 percent per annum. (The stipulation regarding the maximum spread between lending and deposit rates was withdrawn on 15 August 2001) |
| g. | With effect from 25 April 1996, banks are required to follow the MMA’s classification criteria in accordance with a uniform credit risk grading system or loan asset classification matrix and charge a loan loss provision against all classified loans and advances as per regulations established by the MMA. |
| h. | With effect from 1 January 1998 all commercial banks are required to maintain a minimum level of paid-up capital that is not less than rufiyaa 30 million. Branches of foreign banks operating in Maldives will meet a similar minimum capital requirement through the assignment or allocation of equity capital into their Maldives operations from the home country office. Half of the minimum required capital has to be deposited with MMA as ‘capital deposit’, bearing interest at 1.5 percent per annum. In addition, all commercial banks have to maintain, at all times, a capital adequacy ratio not less than 8 percent of risk-weighted assets. |
| i. | With effect from February 1999, banks are required to recognise the discount on Certificates of Deposits (CDs) periodically over the life of the CD using the 'gross' method. Banks are required to make CD discounts on a regular basis over the maturity period of the CD calculated at the daily rate. |
| j. | With effect from 6 August 2001, MMA provides a Lombard facility to banks for their short-term liquidity needs, the terms and conditions of which are decided by MMA on a case-by-case basis. The basic terms prevalent at present are a maximum interest rate of 5 percentage points above the highest rate of interest prevailing in the banking industry, and a duration not exceeding the longer of 90 days or the remaining maturity period of MMA CDs secured against the facility. |
