The Chinese central bank has announced another targeted cut to the required reserve ratio (RRR) as part of efforts to keep the economy ticking in the wake of the COVID-19 outbreak.
The People’s Bank of China (PBOC) announced via its official website that it would cut the RRR for smaller banks by 100 basis points, via two cuts of equal size on 15 April and 15 May.
The move will reduce the RRR for China’s roughly 4000 small and medium-sized banks to 6%, unleashing as much as 400 billion yuan (approx. USD$56.38 billion) in liquidity.
A regular meeting of the State Council held on 31 March previously confirmed that it would “further strengthen financial inclusion support measures for micro, small and medium enterprises,” with measures including another targeted required reserve ratio (RRR) cuts for small and medium-sized banks.
PBOC has also announced that it will reduce the interest rate on the excess reserves of financial institutions that are held with it to 0.35% from 0.72% on 7 April.
On 16 March China implemented a targeted RRR cut of 0.5 to one percentage points for banks that satisfied requirements, while qualified joint-stock banks also enjoyed an additional targeted reduction of one percentage point to support the issuance of financial inclusion loans.
The latest RRR cut scheduled for April and May will be the third this year, as well as the 10th since early 2018.