Bank Negara Malaysia urged to cut reserves to spur green lending: think tank

The central bank is also encouraged to offer preferential rates to banks for green loans.

Positive Money, a think tank, has called for Bank Negara Malaysia to relax reserve requirements for banks to encourage green lending.

Positive Money said that Malaysia’s central bank should consider reducing the amount of money that banks are required to hold in reserve if they are lending to a green project, according to a statement on 28 September 2026.

This will encourage lending to critical infrastructures like renewables, the think tank said.

Positive Money ranked the BNM second in its East and Southeast Asia central banking scorecard in 2025, behind only China in having the strongest green central banking policies.

“In our East and Southeast Asia Green Central Banking Scorecard, we found Malaysia to be a regional leader in green central banking, placing second amongst the ASEAN+3 countries,” said Joe Herbert, senior researcher at Positive Money.

Apart from reducing reserve requirements to encourage more green loans, Positive Money also said that the BNM should offer preferential lending rates or lend money to financial institutions at a reduced interest rate on the condition they invest that money in green projects.

Positive Money also said that the BNM should integrate environmental considerations as collateral, and that the BNM should take steps to make its own investment portfolio greener. For example, the Bank of Korea incorporated billions of dollars of ESG assets into its foreign reserves.

The BNM was also encouraged to implement green taxonomies, which define what counts as a green investment; and to strengthen ties with other central banks and financial regulators.