The People’s Bank of China has decided to cut the reserve requirement ratio for some banks by 50 basis points, which is expected to release approximately 700 billion yuan (US$107.61 billion) in liquidity, The Paper reported.
It’s the third time this year that the central bank cut the amount of cash some lenders must hold as reserves. The aim is to support small and micro enterprises in financing, and to accelerate the pace of debt-for-equity swaps.
The cut will apply to major state-owned commercial banks, joint-stock commercial banks, postal banks, city commercial banks, rural commercial banks and foreign-funded banks, and it will take effect from July 5 onward.
The amount of liquidity that is expected to result from the reduction in reserves has exceeded that of the previous two cuts as well as what the market was expecting.