What is Overnight Policy Rate (OPR)?

The OPR, in turn, has an effect on employment, economic growth and inflation. It is an indicator of the health of a country’s overall economy and banking system.

Most banks will lend out as much money as possible in terms of loans whilst maintaining the minimal cash required by Bank Negara. However, in the event that cash withdrawal exceeds the amount of cash available in the bank, the particular bank will then need to borrow cash from other banks, and make an interest rate, which is where OPR comes in. 

Increasing the OPR will immediately increase the cost of borrowing for banks, and thus, will lead to a chain effect. OPR is also how Bank Negara regulates financial institutions and banks.