China to cut RRR for rural banks

BEIJING, Apr 22 (Reuters): China's central bank will cut the amount of deposits rural banks must hold as reserves by between 0.5 and 2.0 percentage points, it said on Tuesday, the latest in a series of measures to help combat a slowing economy.
The reserve requirement ratio (RRR) will be cut by 2.0 percentage points for rural commercial banks and by 0.5 percentage point for rural credit cooperatives, the People's Bank of China said in a statement on its website www.pbc.gov.cn.
After the cuts the RRR for some rural banks will be as low as 13 per cent, the central bank said.
China's premier, Li Keqiang, had first announced the RRR cuts last week, but had not given details. Li's announcement came on the same day as official figures showed that China's economy expanded at its slowest pace in 18 months between January and March.
It also came just two weeks after China took its first step this year to juice its slackening economy -- cutting taxes for small firms and speeding up investment in railways.
"The cuts will help rural financial institutions increase their financial strength and their ability to support rural development," the central bank said in Tuesday's statement.
In a later separate statement it said that the cuts do not mean a change in the direction of overall monetary policy, which will remain prudent.
"The reserve requirement cut for some rural financial institutions does not mean a shift in the direction of prudent monetary policy and will not affect the total liquidity conditions in the banking system," the central bank said.
Some analysts believe it is a matter of time before China takes more forceful action to energise growth, such as relaxing reserve requirements for major banks to free up more funds in the economy.