China's central bank announced on Friday it will slash banks' reserve requirement ratios (RRRs) by 100 basis points (bps), in a bid to lower financing cost for companies and further support the real economy.

The reduction, which will release 1.5 trillion yuan in liquidity into the financial system, will be made in two equal stages, effective January 15 and 25, the People's Bank of China (PBOC) said in a statement on its website. 

Some of the liquidity released will be used to pay back maturing medium-term loans in the first quarter of 2019, resulting in the freeing up of a net 800 billion yuan, according to the PBOC.

The move, which comes ahead of China's Spring Festival holiday when cash conditions often get tight, will allow financial institutions to further strengthen support to the private businesses and small- and medium-sized enterprises (SMEs), the PBOC said.

Currently, the RRRs are 14.5 percent for large banks and 12.5 percent for smaller banks. The cut in RRRs is the first in 2019 and the fifth in a year by the PBOC.

The central bank said China's economic growth is still within a reasonable range and it will continue to implement a prudent monetary policy, without engaging in massive stimulus.

"We will maintain reasonable and sufficient liquidity, maintain reasonable growth in the scale of money and credit and social financing, stabilize macro-leverage, and seek internal and external balances," it said.

PBOC's announcement came just hours after Chinese Premier Li Keqiang said China will take more measures to support the financing of private companies and SMEs, including cuts in RRRs, taxes and fees.