UPDATE 1-China cbank to cut reserve requirements for small, medium banks

China's central bank said on Monday it will cut the reserve requirement ratios (RRRs) for small and medium-sized banks effective from May 15, in a targeted policy measure to help support companies struggling amid an economic slowdown.

The People's Bank of China (PBOC) said in a statement that the reduction will release about 280 billion yuan ($41.23 billion) in long-term funding, which will be used for loans to small and private companies. The central bank said it will cut the RRR for about 1,000 rural commercial banks operating in counties to 8 per cent, equal to the RRR for smaller rural credit cooperatives. The move will help lower funding costs for small and micro firms, the PBOC said. Small and medium-sized banks currently have RRRs ranging from 10 per cent to 11.5 per cent.

The State Council, or cabinet, said on April 17 that a policy framework would be set up to implement relatively low RRRs for small and medium-sized banks. The PBOC is likely to cut RRRs for small banks to encourage more lending to small and private firms - which are vital for economic growth and job creation - policy insiders told Reuters previously, who pencilled in at least one such "targeted" RRR cut this year.