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