China to raise bank reserve ratio again

January 15th, 2011 - 12:27 pm ICT by IANS  

Beijing, Jan 15 (IANS) The People’s Bank of China has said that it will raise the banks’ reserve requirement ratio by 50 basis points from Jan 20.After this hike, the major banks will have to set aside 19 percent of their reserves and small and medium banks will have to keep 15.5 percent of their deposits as reserve, a record high for the country’s deposit-taking institutions, China Daily reported Friday.

According to the central bank’s latest figures, the reserve ratio hike will tighten another 350 billion yuan ($53.1 billion) of banks liquidity. The outstanding yuan-denominated deposits in China stood at 71.82 trillion yuan ($10.9 trillion) by the end of 2010.

It was the central bank’s first move in 2011 to tighten excessive liquidity in the market amid mounting inflationary pressure.

The bank had raised the reserve ratio for sixth times last year to rein in inflation, as China’s consumer price index (CPI), a main gauge of inflation, hit 5.1 percent in November 2010, the highest in 28 months.

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