THE central bank said yesterday that it will cut reserve requirement ratios (RRRs) to release about 280 billion yuan (US$41 billion) for some small and medium-sized banks, in a targeted move to support companies amid an economic slowdown.

The amount of cash released by the latest cut would be one of the smallest from any of the RRR cuts since January 2018.

The People’s Bank of China (PBOC) said in a statement that the required reserve ratio for rural commercial lenders that serve local companies in the county where the bank operates or have less than 10 billion yuan (US$1.5 billion) of assets will be lowered to 8 percent, equal to the RRR for smaller rural credit cooperatives, taking effect May 15.

About 1,000 county-level rural commercial banks are qualified for the reduction, and all the newly released funding will be used for loans to small and private companies.

The move will help lower funding costs for small and micro firms, the central bank said.

Small and medium-sized banks currently have RRRs ranging from 10 percent to 11.5 percent. The current RRR for rural commercial lenders is at 11 percent, according to Zhou Guannan, senior fixed-asset analyst at Hua Chuang Securities Co.

The central bank has cut the RRR five times in the past year, lowering the ratio to 13.5 percent for big banks and 11.5 percent for small to medium-sized lenders.

Previous policy announcements usually fell on non-trading times after the market closed, analysts from CITIC Securities noted, making the timing of this announcement, as markets were opening, unusual.

Economists had expected further targeted cuts on the RRR this year as China seeks to underpin growth.

The move comes after the State Council last month called for changes to allow medium and small-sized banks to set aside less money in reserves.

The decision continues the targeted easing approach which seeks to lower the cost of loans for small and private companies and expand the amount of money lent to them while avoiding flooding the economy with liquidity.

The Financial News, the central bank’s newspaper, said the country still has room for targeted reserve ratio cuts in an article published yesterday.

(SD-Agencies)