Economists welcome scrapping of bank lending rates in China

Economists welcome scrapping of bank lending rates in ChinaEconomists have welcomed the step by the central bank of China to remove the restrictions on the bank lending rates in the country, in a move to reform the country's financial system.

The People's Bank of China (PBOC) has announced that it has removed the floor limit for banks' lending interest rates in the country. The new rules that came into effect on Sunday, would allow banks to determine their own landing rates depending upon market conditions. Under the previous rules, the financial institutions were not allowed to lend below the rate 70 per cent of the guideline rates.

The central bank said in a report that about 90 per cent of outstanding loans are priced above the benchmark rates. Experts have said that the move shows that the Chinese government is looking to reform the economy with major reforms. It is believed that the removing of the restrictions could make it easier for enterprises to funds at lesser costs and allow better use of financial resources to boost economic growth.

Some also believe that the move would increase competition among the banks in the country and make their operations faster in the country