Ratios said to differ for smaller banks

08:49, February 12, 2011      

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China has imposed different reserve requirement ratios on some smaller banks after credit surged in January, the China Securities Journal reported yesterday.

The move was made after the week-long Spring Festival holiday and mainly affect city commercial banks, the newspaper reported, citing sources it didn't name.

By locking up more capital with the central bank, the People's Bank of China hopes to siphon funds from the market as excess liquidity is driving up inflation.

The report didn't disclose more details on the different requirement ratios.

Big banks in China now face a record reserve requirement ratio of 19 percent.

Banks lent strongly in January, with new loans expected to be about 1.25 trillion yuan (US$190 billion). They extended 7.95 trillion yuan of yuan-denominated loans last year, surpassing the official target of 7.5 trillion yuan.

The PBOC said in late January that it will closely monitor bank lending this year and assign different requirement ratios for commercial lenders based on their capital strength. The move is among a package of measures to control inflation and prevent asset bubbles this year.

China raised the ratio six times in 2010 and once earlier this year.

The central bank raised its benchmark interest rates this week for the third time since October.

The one-year deposit rate is now 3 percent, up from 2.75 percent, while the one-year lending rate increased by the same 25 basis points to 6.06 percent.

Economists agreed that the tightening measures will be rolled out in the first half of this year in an effort to contain inflation fears.

Economists are widely expecting faster inflation for January, whose data is due to be released next Tuesday.

Source: Shanghai Daily
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