Starting Thursday, six of China's largest commercial banks have lowered their RMB deposit rates. This marks the first reduction by these major banks this year and the fifth such reduction since September 2022.

The banks implementing these changes are Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank of China.

Specifically, the annual interest rate for demand deposits has been lowered by 5 basis points. The rates for fixed deposits, including full-term deposits for three months, six months, and one year, have been reduced by 10 basis points. The rates for two-year, three-year, and five-year deposits have been lowered by 20 basis points.

On the same day, the central bank also conducted a 200 billion yuan ($28 billion) medium-term lending facility (MLF) operation and lowered the rate by 20 basis points, marking the second MLF operation this month.

Earlier this week, the People's Bank of China (PBOC) announced an adjustment to the bidding method for the 7-day reverse repos operation and reduced the rate by 10 basis points on Monday. On the same day, the loan prime rate (LPR) for one-year and over-five-year loans was also lowered by 10 basis points.

Experts suggest that the simultaneous 10 basis point reduction in the one-year and over-five-year LPRs directly influenced banks to lower their deposit rates. While the reduction in deposit rates will decrease the interest income for depositors, it is expected to help banks lower lending rates further, thereby reducing financing costs for businesses and individuals.

The policy rate cut is anticipated to gradually transmit through the financial markets into the real economy, fostering a decline in comprehensive financing costs and supporting economic recovery, according to experts.

(Cover via CFP)