Xinhua News Agency reports this weekend that China's National People's Congress has voted to remove a rule that capped banks' lending relative to deposits at 75 percent
- Will take effect on October 1
- The loan-to-deposit ratio will now be regarded as a liquidity-monitoring indicator
Analysts say the amendment could boost lending moderately (if the demand for loans is there)
- It should also reduce the occurrence of banks disguising loans as investments
- Say it brings China closer to getting rid of the deposit rate ceiling, a key reform
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Note:
- Currently in China, for every dollar a bank collects in deposits, it can lend only 75 cents
- This restriction was temporarily suspended in response to the global financial crisis back in 2009