The central bank announced it will lower reserve requirement ratios for small and medium sized banks which mainly serve local companies.

The adjustment is part of the central bank’s efforts to establish a policy framework of allowing small and medium sized banks to enjoy lower RRR and reduce financing cost for small and micro sized companies, it said in an official statement.

The rule will take effect on May 15. The qualified banks are those only operate in local county-level regions, or have an asset value of less than 10 billion yuan if it has branches beyond its local county.

RRR for such banks will be reduced to 8%, the same as for the Rural Credit Cooperatives.

About 1,000 county-level rural commercial banks can enjoy the new policy which could release long-term funding of 280 billion yuan (US$41 billion) to support the financing demands of private and small companies.