The People's Bank of China (PBOC) will change rules governing how loan-to-deposit ratios are calculated at banks starting from next year, according to a copy of a central bank document seen by Reuters, in a move that will boost liquidity conditions. The PBOC will include savings held by banks for non-deposit-taking financial institutions in banks' deposits, which will expand the base for calculating loan-to-deposit ratios, the document said. Sources with knowledge of the situation had told Reuters last week that the PBOC was weighing such a rule change.
Under the current rules, Chinese banks are allowed to lend up to 75 percent of their deposits.
The sources last week said 24 major financial institutions were told at a meeting that even if interbank deposits are included in the base, they may not need to set aside additional reserves, leaving more liquidity available for lending and investment.
The move is seen as an additional attempt to reinvigorate productive business investment without resorting to an across-the-board cut to reserve requirement ratios (RRR).