March 21, 2012 / 10:06 AM / in 7 years

China c.bank cuts RRR for more Agbank rural outlets

BEIJING, March 21 (Reuters) - China cut the required reserve ratio (RRR) for more outlets of Agricultural Bank of China to encourage lending in rural areas, the central bank said on Wednesday.

The preferential policy, originally covered 563 county-level outlets in eight provinces, is expanded to cover another 379 outlets in four provinces, the central bank said. The lower reserve ratio will be effective from March 25.

These outlets — typically in very rural areas — will have an RRR ratio 2 percent below the benchmark for Agbank, which is 20.5 percent at present, if they can prove that a certain percentage of lending, not disclosed by the central bank, is going to the agriculture sector.

So far, 565 outlets have qualified for the lower RRR ratio, a move that could free 23 billion yuan for lending from these outlets, the People’s Bank of China said in a statement on its website (www.pbc.gov.cn).

China’s required reserve ratio, the percentage of deposits commercial lenders are required to put at the central bank, is a key tool for PBOC to manage bank credit and liquidity.

In addition to the Agbank rural outlets, smaller lenders, rural credit cooperatives and bank branches in areas hit by earthquake are also entitled to the preferential policy.

China cut RRR across the board for the country’s biggest banks, including Agbank, by 50 basis points in February, bringing the level down to 20.5 percent. (Reporting by Zhou Xin and Nick Edwards; Editing by Ramya Venugopal)

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