China increases reserve requirement ratio for banks
China on Thursday raised the proportion of funds banks must hold in reserve with the central bank to a record high of 15 per cent.
By PTI |
BEIJING: China on Thursday raised the proportion of funds banks must hold in reserve with the central bank to a record high of 15 per cent.
The reserve requirement ratio was increased by 50 basis points from January 25 to take it to 15 per cent, the highest since 1984, to draw back excess liquidity at banks and curb the overly fast growth of credit.
Excess liquidity could result in asset bubbles and economic overheating. The problem becomes more prominent as the record trade surplus pumps more cash into the country.
The step was part of the stringent monetary policy, the People's Bank of China, central bank, said, according to a news agency.
China's foreign exchange reserve had reached $1.53 trillion by the end of 2007, up 43.3 per cent from 2006, with USD 461.9 billion added to the country's forex reserve in 2007.
China's central bank had last year increased the reserve requirement ratio 10 times, the last one in December, and the interest rates six times, in efforts to check inflation and prevent the economy from overheating.
The inflation had reached 6.5 per cent in November last year, a record monthly high in 11 years.
The reserve requirement ratio was increased by 50 basis points from January 25 to take it to 15 per cent, the highest since 1984, to draw back excess liquidity at banks and curb the overly fast growth of credit.
Excess liquidity could result in asset bubbles and economic overheating. The problem becomes more prominent as the record trade surplus pumps more cash into the country.
The step was part of the stringent monetary policy, the People's Bank of China, central bank, said, according to a news agency.
China's foreign exchange reserve had reached $1.53 trillion by the end of 2007, up 43.3 per cent from 2006, with USD 461.9 billion added to the country's forex reserve in 2007.
China's central bank had last year increased the reserve requirement ratio 10 times, the last one in December, and the interest rates six times, in efforts to check inflation and prevent the economy from overheating.
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The inflation had reached 6.5 per cent in November last year, a record monthly high in 11 years.
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