MNI BRIEF: PBOC May Lower Deposit Rate Ceiling: Media

The People's Bank of China may lower deposit rate ceiling for commercial banks by changing the price mechanism of lenders' deposits without adjusting the benchmark rate, Caixin reported Wednesday citing sources. The new mechanism seeks to add a basis point differential on the benchmark interest rate, differing from the current mechanism that multiplies the benchmark by a given percentage, Caixin said.

The PBOC has not adjusted its benchmark yuan deposit rate since October 2015, with the one-year rate currently 1.5%. As an example, if the deposit rate ceiling rises by 40%, the upper limit deposit rate would be 2.1%. If applying the new method, the upper limit of the interest rate of a certain type of commercial bank may only be 2% (the base interest rate plus for example 50 basis points), Caixin reported.

The idea was discussed by some bank officials on Tuesday, Caixin said, though the PBOC has not yet commented on it. The current self-discipline mechanism previously set the upper limit at no more than 1.4 times the benchmark, though allowing small banks to adjust upwards to help to attract depositors.