- 20 Mar 2023
- ICICIdirect Research
China to cut reserve requirement ratio (RRR) to support lending, strengthen economic recovery
News: China's central bank has indicated that it would cut the amount of cash that the banks must hold as reserve for the first time this calendar year to help keep ample liquidity and support a nascent economic recovery. The People’s Bank of China (PBoC) plans to reduce the Reserve Requirement Ratio (RRR) for almost all the banks by 25 bps, effective from March 27, 2023
Views: China has cut the amount of cash banks must keep in reserve in an effort to support lending and strengthen the economy’s recovery from pandemic restrictions and a property market slump. The cut was aimed at ensuing liquidity in the banking system to sustain the rapid pace of lending seen in January and February. The average reserve rate of financial institutions will be 7.6% following the cut. The cut will not apply to banks whose reserve ratio is 5%. This step will aid in consolidating recovery and expanding Chinese demand, thereby auguring well for the global metal sector
Impact: Positive