China’s central bank has announced a cut in the reserve requirement ratio (RRR) for some rural lenders in a move aimed at supporting the agricultural sector and the overall economy.
County-level rural commercial banks will see their RRR lowered by 2 percentage points starting Friday, while county-level rural cooperatives will have their reserve ratios cut half a percentage point.
The adjustments will strengthen the banks’ ability to provide financial services in rural areas, the People’s Bank of China (PBoC) said in a statement Tuesday. However, these will not have any impact on the overall liquidity in the banking system, it said.
The RRR refers to the percentage of deposits that banks need to set aside as reserves. Lower reserve requirement will allow lenders to offer more credit, helping boost economic activity.
The central bank said it will maintain a prudent monetary policy and keep growth in loans and social aggregate financing at a reasonable level.
Meanwhile, China Banking Regulatory Commission vice chairman Zhou Mubing said that along with the RRR cuts, increased lending to small rural enterprises and securitization of agricultural loans will help boost the supply of funds.
China will soon introduce supportive policies on rural mortgage loans backed by farmers’ land contract rights and property rights, Zhou said, according to the government website.
Also, a financing guarantee fund will be established in some rural areas.
In a separate statement, the PBoC said China’s 8,127 small and micro loan companies had outstanding loans of 844.41 billion yuan (US$135.4 billion) as of end-March.
Jiangsu province had the largest outstanding loans among 31 areas at 115.81 billion yuan, involving 607 financial institutions.
Small and micro loans grew 25.1 billion yuan, in the first quarter, the central bank said.