RRR Cut For Rural Banks

China c.bank targets farm sector in reserve requirement cut for some banks

China's central bank said it will cut the level of deposits for banks with sizeable lending to the farming sector and small- and medium-sized firms, a move the government had flagged in May.

The People's Bank of China said the targetted 50-basis-point reduction in the reserve requirement ratio (RRR), effective from June 16, would also apply to financial firms that disburse consumer or auto loans.

The announcement puts into action a promise by the cabinet to lower the RRR for more banks on May 30, and underscores the government's intent to selectively relax policy in areas of the real economy it deems most in need of assistance.

The nuanced approach is to avoid increasing credit supply for all businesses, which critics fear would stoke speculation or wasteful investment in the world's second-biggest economy.

This was telegraphed ahead of time and these banks collectively only account for a very small portion of the credit market.