The People’s Bank of China (PBOC) has issued a new directive which loosens the benchmark for lenders to qualify for targeted cuts to the required reserve ratio launched last year.
On 2 January PBOC announced via its official website that it would adjust the small and micro-enterprise loan assessment benchmark for financial inclusion targeted reserve cuts from ” less than 5 million yuan in credit per unit” to “less than 10 million yuan in credit per unit.”
PBOC said that the move will be of “benefit to expanding the coverage of financial inclusion targeted reserve cut preferential policies, guiding financial institutions to better satisfy the loan needs of small and micro-enterprises, and enable more small and micro-enterprises to benefit.”
The “financial inclusion targeted reserve cut” was announced by PBOC on 30 September 2017, and first launched on 25 January 2018.
Under the cut Chinese commercial banks enjoy a 0.5 percentage point reduction in their reserve ratios if their financial inclusion ratio reaches 1.5%, and a reduction of 1.5 percentage points if the financial inclusion ratio hits 10%.
Ming Ming (明明), an analyst with CITIC Securities, said to China Securities Journal that the move could unleash up to 77 billion yuan in additional liquidity should listed commercial banks manage to satisfy a financial inclusion ratio of 10% under the new standards.