The People Bank of China said it will cut the reserve-requirement ratio for some banks to reduce their funding costs and in turn help ease conditions for businesses and individuals.
The 1 percentage point reduction takes effect April 25, the central bank said late Tuesday. About 900 billion yuan ($143 billion) of outstanding medium-term lending facility loans will be repaid on the day of the cut and another 400 billion yuan will be unleashed, it said in a statement.
The PBOC said the reduction in funds required to be parked with it will apply to large commercial banks, joint-stock banks, city commercial banks, rural commercial banks, and foreign lenders. It is intended to “improve the liquidity structure,” it said.
Amid a multi-year effort to cut financial risk and curb credit growth, the PBOC has been fine-tuning liquidity conditions and guiding market rates higher without raising broader borrowing costs. Even as the economy is forecast to slow this year, policy makers have given little sign they’re ready to depart from their “prudent and neutral” stance.
Source : Bloomberg