The People's Bank of China recently decided to increase RMB deposit reserve ratio of deposit-taking financial institutions by 0.5 percentage points, starting from February 24, 2011.
This is the second time the central bank has raised the deposit reserve ratio this year and also the eighth time that the central bank has increased deposit reserve ratio since last year.
Media reports say that after this increase, the deposit reserve ratio of major financial institutions in China is as high as 19 percent, a record high. The deposit reserve ratio of medium and small financial institutions is as high as 15.5 percent.
The action will contribute to more reasonable credit release in the future; it is also an important measure of the bank to supervise inflation expectation.
Recycling market liquidity and commodity futures will face call back pressures as the central bank raised the deposit reserve ratio for the second time this year.