Huge deposit at banks to ensure lending needs
China will deposit 50 billion yuan (US$7.3 billion) of government cash with commercial lenders this month in a move to make more funds available for lending and bolster return of its treasury funds.
The cash will be deposited at banks for six months from Wednesday to May 26, 2009, the People’s Bank of China said in a statement on its Website yesterday. The deposit interest rate will be fixed via an auction among commercial lenders, it said.
It will be the fifth time this year that China has placed treasury cash in commercial lenders. In each of the previous four occasions, the central government placed 30 billion yuan of cash from the treasury with lenders for a three-month period.
China started to deposit treasury money with commercial lenders in 2006 as part of its efforts to shore up returns of the cash. It placed 20 billion yuan of treasury cash with lenders for three months in 2006 and deposited 30 billion yuan for six months in 2007.
The increased tempo to make more cash available at banks for lending comes at a time when China is turning to expansionary fiscal and monetary polices to boost growth to counter a potential global recession.
The central bank said early this month that it will scrap lending quotas on commercial lenders and boost credit to key construction projects, small and medium enterprises and the rural sector.
The central bank also encouraged banks to lend to back the central government’s infrastructure projects.
Tags: BOC, central-bank, deposits