The People's Bank of China. Photo: iStock
The People's Bank of China. Photo: iStock

Before the Federal Reserve will deliver its decision on interest rates, the central bank announced the creation of a new monetary policy tool — targeted medium-term lending facility, or TMLF —  which aims to release long-term liquidity to support private and small companies, The Paper reported.

The TMLF will provide a long-term stable source of funding for financial institutions based on the growth of their loans for small and private firms, the People’s Bank of China said on its website.

Compared with the current medium-term lending facility (MLF), the one-year interest rate on the TMLF will be 3.15%, 15 basis points lower than the MLF rate.

Meanwhile, funds of TMLF can be used for three years, compared to MLF funds which mature in a year.

Financial institutions such as large commercial banks, joint-stock commercial banks and big city commercial banks showing great support to the real economy can apply for the TMLF, according to the report.