China implements RRR cuts for small, medium-sized banks

BEIJING - China started to apply a low reserve requirement ratio (RRR) for some small and medium-sized banks from Wednesday, according to the central bank.

The People's Bank of China unleashed about 100 billion yuan ($14.6 billion) of long-term capital Wednesday in the first of its three phases to implement the RRR cuts.

According to the bank's previous statement, a total of about 1,000 county-level rural commercial banks will enjoy a favorable RRR of 8 percent, unleashing long-term capital of about 280 billion yuan, which would be used as loans to private as well as small and micro enterprises (SMEs).

The favorable ratio will apply to the rural commercial banks that only operate in its county-level administrative area, or those banks that have branches in other county-level administrative areas but only have asset size within 10 billion yuan.

The move followed a State Council decision in April to establish a policy framework for applying a fairly low RRR for small and medium-sized banks in a bid to lower financing costs for SMEs.