The People's Bank of China said banks should use the loan prime rate mechanism when setting the terms for at least 30% of new loans by end-September, the Securities Times reported Aug. 26, citing unnamed sources.
They should then raise the proportion of such loans to at least 50% by end-December and at least 80% by end-March 2020. However the authority exempted rural commercial banks, rural credit cooperatives and community banks from the targets, due to the relatively weak pricing power of smaller lenders, the report said.
The central bank will also incorporate LPR implementation into its macro-prudential assessment, and banks that set an implicit lower limit for lending rates through concerted action will fail the assessment.
The authority's Shanghai branch recently urged banks to implement the LPR mechanism and to further lower borrowing costs for small businesses.
