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The People Bank of China has revised the lending policy to ease the tight liquidity condition among small businesses in the country. The new policy allows a commercial bank to reduce the reserve ratio requirement (RRR) if the loan to small businesses reaches a certain amount.

Since 2017, the PBOC said that the RRR for commercial bank could be reduced by 0.5% if the lending to small and micro companies takes up to 1.5% of their annual new loan. If new loans to small companies are more than 10%, banks are eligible for an additional 1% reduction in RRR.

Previously, only loans to companies with less than 5 million-Yuan credit lines are considered as small and micro loans. However, the latest tweak lowers the criteria to less than 10 million-Yuan credit lines.   

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