Jan 23, 2019 (China Knowledge) - The People's Bank of China (PBOC), today, launched Targeted Medium-term Lending Facility (TMLF) to enhance financial support to small & micro enterprises and private companies. This is the first time since 2016 that the central bank has reduced the prices.
The target group of the new TMLF include large commercial banks, joint-stock commercial banks and large city commercial banks which meet the relevant conditions and apply for the facility. According to the incremental loans estimates of small and micro enterprises and private enterprises in the fourth quarter of 2018, the total amount is RMB 257.5 billion.
The facility provision will last for one year and financial institutions can renew twice according to their needs. The actual using period can reach three years. TMLF interest rate is 3.15%, which is 15 basis points lower than Medium-term Lending Facility (MLF) interest rate.
The reduction of 15BP in interest rate is conducive to cutting down the financing cost of some banks. At present, commercial banks generally have debt pressure. PBOC can reduce the debt cost of these banks by target interest rate reduction, helping reduce the financing cost of the real economy through the banking system.
TMLF can be regarded as structural interest rate cut, showing that Chinese policy makers are not optimistic about the country’s economic expectations for 2019 and there is a probability of fall in GDP growth. Under such situations, it is necessary to implement the prudent monetary policy including TMLF.
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