BEIJING : China's central bank on Monday pumped cash into the banking system via reverse repos to maintain liquidity.
The People's Bank of China injected a total of 120 billion yuan into the market, including 40 billion yuan through seven-day reverse repos at an interest rate of 2.2 per cent and 80 billion yuan of 14-day contract at an interest rate of 2.35 per cent, according to a statement on the website of the central bank.With no reverse repos maturing Monday, this led to a net injection of 120 billion yuan.
A reverse repo is a process in which the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future. China will pursue a prudent monetary policy in a more flexible and appropriate way, according to this year's government work report. The country will use a variety of tools including required reserve ratio reductions, interest rate cuts, and re-lending to enable M2 money supply and aggregate financing to grow at notably higher rates than last year, said the report. - Xinhua/Asian News Network