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China reforms: Bank lending rates restrictions eased
July 20, 2013, 6:37 am

Financial institutions can decide their own rates following commercial principles [Xinhua]

Financial institutions can decide their own rates following commercial principles [Xinhua]

In a clear signal of stepping up market reforms, China’s central bank announced the liberalising of bank lending rates on Friday.

The floor limit for lending interest rates will be cancelled and financial institutions can decide their own rates following commercial principles, said a People’s Bank of China (PBOC) statement.

Controls on bill discount rates will be scrapped and the ceiling limit for lending from rural banks will be eliminated.

It did not remove the ceiling on deposit rates, and retained the lending interest rates for personal homes for the healthy growth of the property market.

Under the previous system, the PBOC set guidelines for lending and deposit rates for commercial banks which were willing to lend to state-backed firms with artificially high rates.

Banks are not allowed to lend at rates below 70 per cent of the guideline rates. There are no ceilings for deposit rates.

Xinhua

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