Cuts to benefit SMEs

The government's latest move to cut both the benchmark lending rate and the reserve requirement ratio for smaller banks is widely seen as a bid to help SMEs hit hard by a tighter credit regime.

The People's Bank of China on Monday announced a 27-basis-point cut to the commercial banks' benchmark lending rate from yesterday. The deposit rate will remain unchanged. It was the first time the central bank has cut the benchmark lending rate since February 2002.

Meanwhile, the central bank has lowered the reserve ratio for medium and small financial institutions by 100 basis points from Sept 25. Economists and analysts said the selective reduction of the reserve ratio indicated additional efforts to make available more credit to the many cash-strapped SMEs, which formed the main client base of the smaller banks.