The People's Bank of China
, the country's central bank, announced on Feb. 18 it will cut the reserve requirement ratio by 50 basis points for the country's deposit-taking financial institutions, effective from Feb. 24.
In a statement, PBOC
said it intends to lower the reserve requirement ratio to 20.5% for larger financial institutions and to 17% for small- and medium-sized financial institutions.
The move is expected to release a lending capacity between RMB 350 billion and RMB 400 billion, or around US$55.6 and US$63.5 billion, in a bid to crank up credit creation, said analysts.
This is second cut on banks' reserve requirement ratio after PBOC
, on Dec. 5, 2011, lowered the ratio for the first time over the past three years.
Jin Qi, an assistant governor with PBOC
, said the Chinese government would continue to stick to a prudent monetary policy for economic growth.
In January, China's consumer price index (CPI), the major gauge of inflation, rebounded to a record 4.5% over the past three months, higher than a forecast range of 4% to 4.2%, sources reported.