(Reuters) – Chinese banks plan to cut interest rates on 300 trillion yuan ($42.2 trillion) of deposits as soon as this week, Bloomberg News reported on Tuesday, citing people familiar with the matter.
Major banks such as Industrial and Commercial Bank of China (OTC:) and China Construction Bank (OTC:) will reduce interest rates on many deposit products based on the central bank’s interest rate self-discipline mechanism, the report said.
The report added that interest rates on one-year fixed deposits may fall by at least 20 basis points (bp), while long-term term deposit rates may fall by at least 25 bp.
Major banks did not immediately respond to Reuters’ requests for comment.
People’s Bank of China Governor Pan Gongsheng said in September that the central bank would further cut deposit rates by 20 to 25 bps. If the cuts are implemented, it will be the second full-scale reduction this year, following the one in July.
The move will help ease profitability pressures on banks after the country cut mortgage rates and benchmark lending rates as part of a stimulus package to pull the economy out of a deflationary funk.
China’s financial institutions are already under strain due to weak lending demand and rising non-performing loans amid a broader economic slowdown and continued turmoil in the real estate sector.
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