Starting today (February 5), the People's Bank of China will cut the reserve requirement ratio for financial institutions by 05 percentage points, which is what we often call "RRR cut".
The reserve requirement ratio is that each bank will hand over a certain proportion of the deposits it absorbs to the first bank, which is not only the need to ensure financial security, but also one of the important tools for the central bank to implement macro-prudential management.
According to estimates, this time the RRR cut is 05 percentage points, which can provide long-term liquidity for the market of about 1 trillion yuan. In other words, the RRR cut has given banks an extra 1 trillion yuan of low-cost funds in their hands. A number of banks have also stated that they will transmit this benefit to the loan delivery as soon as possible and further increase their support for the real economy.
Generally, before and after the Spring Festival, it is the peak period for everyone to go to the bank to withdraw cash, and the data shows that in recent years, the scale of cash withdrawals before the Spring Festival has exceeded 2 trillion yuan. Therefore, the RRR reduction policy was implemented before the Spring Festival, which can better meet the capital needs during the Spring Festival.
In addition, in late January, the central bank also launched measures such as lowering the re-lending and rediscount interest rate for supporting small agricultural branches, coupled with today's RRR cut, the combined force formed by a series of measures will guide bank loan interest rates to continue to decline. The cost of loans for small and micro enterprises and personal loans may be reduced this year.
*: CCTV News.