County-level Rural Commercial Banks Asked to Use All Funds Freed up by PBC's RRR Cut for Loans Granted to Private Enterprises and Small and Micro Firms
The People's Bank of China ("PBC") has recently issued the Circular on Adjusting Downward the Reserve Requirement Ratio (RRR) for RMB Deposits for Rural Commercial Banks Offering Services in Counties (the "Circular").
The Circular expressly states that the RRR for RMB deposits for rural commercial banks that offer services in counties will be reduced to the same level as that for rural credit cooperatives, and such reduction will be progressively implemented in three phases. Specifically, the RRR for RMB deposits for such rural commercial banks will be cut by one percentage point from May 15, 2019 and then be further reduced by another one percentage point from June 17, 2019, and beginning from July 15, 2019, the benchmark RRR for RMB deposits for such rural commercial banks will be ultimately lowered to 8%. If these banks have carried out the targeted RRR cut policy for inclusive finance before the release of the Circular, this targeted RRR cut policy will be discontinued simultaneously. Moreover, the Circular requires that rural commercial banks that offer services in counties shall use all funds freed up by the RRR cut to grant loans to private enterprises and small and micro firms, as part of efforts to improve their financial services in the local county-level areas. The PBC will add relevant work into the coverage of macro prudential assessment (MPA).