Caixin
FINANCE

Midsize Lenders Set to Stand Out in Latest Reserve-Rate Cut

By Leng Cheng
Beginning next year, Chinese banks will be allowed to set aside less cash as reserves if they extend more new loans to less-creditworthy borrowers. Above, farmers gather chysanthemums in Huangshan, Anhui province, on Tuesday. Photo: Visual China
Beginning next year, Chinese banks will be allowed to set aside less cash as reserves if they extend more new loans to less-creditworthy borrowers. Above, farmers gather chysanthemums in Huangshan, Anhui province, on Tuesday. Photo: Visual China

Midsize Chinese banks will likely benefit most from the central bank’s latest targeted cut in the reserve requirement ratio (RRR), although the policy likely won’t significantly change the loan profile of the overall banking industry, analysts say.

To encourage more lending to the disadvantaged population, college students and small businesses, commercial banks will be allowed to set aside less cash as reserves after meeting certain targets beginning next year. Each bank’s RRR will be cut by 0.5 percentage point, from the current range of 13.5% to 17.0%, if at least 1.5% of its new loans are extended to those less-creditworthy borrowers. A deeper cut of RRR by 1.5 percentage point will kick in if that ratio is at least 10%.

You've accessed an article available only to subscribers
Try 4 weeks for $0.99
SUBSCRIBE
Share this article
Open WeChat and scan the QR code
Copyright © 2017 Caixin Global Limited. All Rights Reserved.