It's Happening....
Banks moving to lower interest rates
- Details
- Category: Ningbo Business
- Published: Tuesday, 10 July 2012 08:26
Until 7:00 last Friday, all the banks in Ningbo, including foreign banks, have adopted the new interest rate after the central bank announced an interest cut last Friday.
The People's Bank of China (PBOC) announced it would reduce the benchmark interest rate for one-year deposits by 25 basis points and that for one-year lending by 31 basis points last Friday.
After the rate cut, the five major state-owned commercial banks, namely the Industrial and Commercial Bank of China, the Agricultural Bank of China, Bank of China, China Construction Bank and Bank of Communications cut the one-year deposit interest rate to 3.25 percent.
In contrast to the state-owned banks, the commercial banks are more flexible in the adjustment of interest rates. Small and medium commercial banks such as China Merchants Bank, China Minsheng Bank, China Everbright Bank, Industrial Bank, Huaxia Bank raised the one-year deposit interest rate by 1.1 times to 3.3%.
The interest cut indicates a smaller interest rate gap between commercial banks and state-owned banks. After the previous interest cut in this June, some commercial banks raised their one-year deposit interest rate 1.1 times to 3.575 percent, while the four state-owned banks set the interest rate as 3.5 percent, showing a 0.75 percent margin. However, the latest interest cut narrows the gap between the two to 0.5 percent.
"The central bank allows lenders in a floating scale to adjust their own loan rate 0.7 times of the benchmark lending standard. Previously on June 8, the central bank set the band at 0.8 times of the benchmark. The move aims to expand the floating range of lending rates and thus accelerate the market-oriented reform of interest rates," said a manager of a large state-owned commercial bank.
Prof. Tian Jianying, dean of Finance Department of Zhejiang Wanli University, said that the PBOC has cut interest rates for the second time in less than a month. The two interest cuts lead to a drop of 50 basis points in one-year lending rate. The effort aims to boost the economy that has started to slow and ease the financing pressure and cost for enterprises and help boost growth.
Zhang Aibing, a general manager of China Zheshang Bank said that the interest cut would further narrow the deposit-loan interest rate gap and force banks to concede part of their profits to the enterprises. It also reflects the principle of financial institutions shall serve the real economy.
