China urges smaller banks to lower deposit rate ceiling

[BEIJING] China's interest rate regulatory body is encouraging smaller banks to lower the ceiling on deposit rates by 10 basis points, two sources with direct knowledge of the matter said on Friday.

Under the guidance shift, smaller lenders would set a ceiling on time deposits of 65 basis points above the benchmark rate, compared with 75 bps until now, according to the sources.

Both sources said the move, first reported by domestic financial media outlet Caixin, was not mandatory.

But lenders who comply would receive bonus points in the macro prudential assessment, which is a central bank-led quarterly health check.

China reformed the way banks calculate deposit rates last year, in a bid to help ease pressure on banks' funding costs. REUTERS