Central Bank: Reduce The Deposit Reserve Ratio Of Financial Institutions By 0.25 Percentage Points

A total of 530 billion yuan of long-term funds have been released in this RRR reduction. Except for some legal person financial institutions which have implemented 5% deposit reserve ratio, the deposit reserve ratio of other financial institutions is generally reduced by 0.25%.

In order to support the development of the real economy and promote the steady decline of comprehensive financing costs, the people's Bank of China has decided to reduce the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25, 2022 (excluding financial institutions that have implemented the 5% deposit reserve ratio). In order to increase support for small and micro enterprises and "agriculture, rural areas and farmers", for urban commercial banks without cross provincial operation and rural commercial banks with deposit reserve ratio higher than 5%, an additional 0.25 percentage point will be reduced on the basis of reducing the deposit reserve ratio by 0.25%. After this reduction, the weighted average deposit reserve ratio of financial institutions is 8.1%.

The people's Bank of China will adhere to the principle of stability and seek progress while maintaining stability. It will continue to implement a prudent monetary policy. It will not flood with water, and take into account the internal and external balance. It will give better play to the dual functions of monetary policy tools in terms of total amount and structure, maintain reasonable and sufficient liquidity, keep the growth rate of money supply and social financing scale basically match, and stimulate market vitality, We will support financing in key areas and weak links, and create an appropriate monetary and financial environment for high-quality development and supply side structural reform.

The relevant person in charge of the people's Bank of China answered a reporter's question on reducing the deposit reserve ratio of financial institutions

1. What is the purpose of this reduction?

A: at present, the liquidity is at a reasonable and sufficient level. The purpose of this reduction is to optimize the capital structure of financial institutions, increase the long-term stability of financial institutions, enhance the ability of financial institutions to allocate funds, and increase support for the real economy. Second, guide financial institutions to actively use the funds for reducing the reserve requirement to support industries and small, medium and micro enterprises seriously affected by the epidemic. Third, the RRR reduction has reduced the capital cost of financial institutions by about 6.5 billion yuan per year, which can promote the reduction of social comprehensive financing costs through the transmission of financial institutions.

2. How much capital will be released in this RRR reduction?

A: a total of 530 billion yuan of long-term funds have been released in this RRR reduction. Except for some legal person financial institutions which have implemented 5% deposit reserve ratio, the deposit reserve ratio of other financial institutions is generally reduced by 0.25%. For urban commercial banks without cross provincial operation and agricultural commercial banks with deposit reserve ratio higher than 5%, an additional 0.25 percentage point reduction on the basis of reducing the deposit reserve ratio by 0.25 percentage points is conducive to increasing support for small and micro enterprises and "agriculture, rural areas and farmers".

3. What are the comprehensive considerations after the reduction?

A: the people's Bank of China will continue to implement a prudent monetary policy. First, we should pay close attention to the changes in price trends and maintain overall price stability. Second, we should pay close attention to the adjustment of monetary policies in major developed economies and give consideration to the internal and external balance. At the same time, we should maintain reasonable and sufficient liquidity, promote the reduction of comprehensive financing costs, and stabilize the macro-economic market.