The required reserve ratio as set by the Fed is only weakly correlated with the actual money supply. The important point is that the money supply increases as a function of demand. Demand in turn depends on many things, including the price of money as set by the Fed. The reason the Fed lowered the reserve ratio requirement in 1992 was more than its announced desire to increase bank lending. It was mainly to improve the financial health and the competitive position of U.S. banks.
Reserves earn no interest and thus are a drag on bank earnings.
Large banks in particular were not in good shape. They were still digging out of their bad loans of the 1980s, and were losing the competition with foreign banks, most of which have no reserve requirements.