Banks' reserve rate raised again in China

Just as we approach the credit policy of our country today, the Central Bank of China raised the amount that lenders must hold in reserve by 0.5 percentage point for the sixth time this year.

The increase in the banks' reserve requirement ratio will take effect from August 15, the People's Bank of China, the central bank, said in a statement on its website.

The ratio will reach 12 percent for big lenders after the adjustment.
The move is not all surprising after the release of macroeconomic data for the first half of this year.

Boosted by ample liquidity, China registered gross domestic product growth of 11.5 percent for the first six months, during which fixed-asset investment rose by 25.9 percent. Lending grew by 16.5 percent year on year.

The central government has vowed to prevent the economy from overheating; and the central bank said the hike in the reserve requirements was aimed at "strengthening management of liquidity in the banking system and control excessive growth in money supply and credit".

This act by the Chinese regulators adds yet another point to be considered by the RBI in their credit policy as explained in RBI credit policy on 31st July