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China central bank provides pledged supplementary lending to select banks: sources

[SHANGHAI] China's central bank has recently provided Pledged Supplementary Lending (PSL) to select banks, two sources with direct knowledge of the matter told Reuters on Monday, as Beijing moves to support longer-term investment amid a slowing economy.

The funds were provided at 3.10 per cent, lower than previous PSL rates offered that they were aware of, the individuals with direct knowledge of the matter told Reuters.

The People's Bank of China did not answer calls requesting comment.

PSLs are ordinarily conducted behind closed doors directly with individual banks, and details are not published consistently or in a timely manner.

The sources, who declined to be identified because they are not authorized to the media, gave no information on the amount offered, or the banks involved.

Analysts say the PSL program, initiated in 2014, is designed to help the central bank better target medium-term lending rates and boost liquidity to specific sectors by offering low cost loans to selected lenders, including policy banks.

The central bank has successfully brought down short-term interbank lending rates with a series of guidance cuts to the benchmark seven-day repurchase agreement (repo) beginning in mid March, but longer term rates have remained relatively elevated.

Analysts have said that much of China's new lending is still dominated by short-term loans, implying credit is being used for speculation or to roll over existing debt, instead of funding fresh investment.