China's central bank announced on Monday that it will cut the reserve requirement ratio (RRR) by 0.5 percentage points for banks engaged in proportionate lending to agricultural and small firms.
The cut will take effect from June 16, said a statement released by the People's Bank of China, the central bank.
The statement provided the details following a cabinet decision late last month to launch narrow-based RRR cuts for banks engaged in lending to agriculture-related businesses and small and micro-sized companies, in efforts to enhance financial support to the real economy.
Banks eligible for the cut include those whose new loans to agriculture-related entities accounted for at least half of their total new lending in the last fiscal year; banks whose outstanding loans to agriculture-related entities accounted for at least 30 percent of their total outstanding loans in the last fiscal year will also be qualified for the cut, the statement said. The same rule applies to banks engaged in lending to small and micro-sized companies, according to the central bank.
"According to the standard, the targeted RRR cut will cover around two-thirds of city commercial banks, 80 percent of rural commercial banks above county level as well as 90 percent of rural cooperative banks above county level," said the statement.
Meanwhile, the central bank will cut the RRR for finance companies, financial leasing firms, and automobile finance enterprises by 0.5 percentage points. The cut is aimed to improve the capital use efficiency of these companies and boost consumption, the statement said.
The central bank noted that the cut will not apply to county-level rural commercial banks and rural cooperative banks, who had their RRR reduced on April 25.
