China to cut RRR for small and medium-sized banks

China will apply a relatively low reserve requirement ratio (RRR) for some small and medium-sized banks starting from May 15, the central bank announced Monday.

Chinese currency RMB [File photo: IC]

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 (41.6 billion U.S. dollars), which will be used as loans to private as well as micro and small enterprises (MSEs), the People's Bank of China said in an online statement.

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 statement said.

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 MSEs.

Stock price of small banks surged after the announcement. Qingdao Rural Commercial Bank Corporation once saw its share price jump by the daily limit of 10 percent on the news before falling back to rise about 6 percent as of 10:30 a.m..