The People's Bank of China simultaneously issued two major policies: targeted reductions in quotas and reductions in excess deposit ratios of financial institutions

China News Agency, Beijing, April 3 (Reporter Wei Wei) The People's Bank of China has simultaneously issued two major blockbuster policies this weekend: targeted reduction of small and medium-sized banks to release long-term funds of 400 billion yuan, and reduced financial institutions' excess deposit reserves Gold interest rate. This is the first time in nearly 12 years that China has reduced the excess deposit ratio of financial institutions.

The introduction of this series of monetary policies will help support the development of the real economy, increase support for small, medium and micro enterprises, and reduce the actual cost of social financing.

The central bank announced on the 3rd that it has decided to lower the deposit reserve ratio by 1 percentage point for rural credit cooperatives, rural commercial banks, rural cooperative banks, village and town banks, and urban commercial banks operating only at the provincial administrative area. It was implemented in two places on May 15th, each time by 0.5 percentage points, releasing a total of about 400 billion yuan in long-term funds.

After the RRR cut, the deposit reserve ratio of more than 4,000 small and medium deposit financial institutions in China has fallen to 6%. From the perspective of Chinese history and the situation of developing countries, it is at a relatively low level.

At the same time, the central bank decided to reduce the excess deposit reserve interest rate of financial institutions from 0.72% to 0.35% from April 7. This interest rate has not been adjusted for nearly 12 years since it was lowered from 0.99% to 0.72% in 2008.

The central bank ’s targeted RRR cut was expected by the market. The executive meeting of the State Council held on March 31 has proposed that "further implementation of targeted reduction of small and medium-sized banks, guidance of all the funds that small and medium banks will receive, to provide loans to small and medium-sized enterprises with a wide range of preferential interest rates".

How do targeted reductions for small and medium banks support the real economy? The relevant person in charge of the People's Bank of China said on the 3rd that the targeted reduction of the standard allowed each small and medium-sized bank to obtain about 100 million yuan of long-term funds, effectively increasing the stable funding sources for small and medium-sized banks to support the real economy, and reducing the cost of bank funds by about 60 per year. 100 million yuan, through bank transmission, will help promote the reduction of the actual interest rate of loans to small and micro enterprises, and directly support the real economy. (Finish)