People’s Bank of China (PBOC), the central bank of the country, has decided to offer CNY200bn ($29bn) to the banking sector in an effort to boost liquidity.
PBOC will inject the capital into the banking system through one-year loans, Bloomberg reported citing a central bank statement. The interest rate remained unchanged at 3.25%.
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The move is expected to help banks in the tax season as well as support the sluggish economy.
Furthermore, the capital injection signifies controlled monetary easing irrespective of slowing demand and dull investment in the country. The additional capital is expected to encourage banks to boost their credit business.
PBOC also released an additional CNY40bn as trimmed reserve ratios at banks become effective. Overall, the central bank has invested a total of CNY240bn in the sector.
Lately, China has taken several initiatives to strengthen the banking sector and increase competition in the industry. Some of the steps included bolstering regulatory oversight, while relaxing some regulations to lure foreign players.
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By GlobalDataIn May, the domestic regulators took over Inner Mongolia-based Baoshang Bank due to increasing credit risks.
Earlier this month, Bloomberg reported that Chinese authorities were mulling a series of small bank mergers to support struggling lenders. Under the plan, troubled banks with assets below CNY100bn would be encouraged to merge operations, stated the report.
