OREANDA-NEWS.  August 28, 2014. In order to implement the decision adopted at the Executive Meeting of the State Council to increase agro-supporting and small and micro enterprise-supporting central bank lending and discount, and enhance the capacity of financial sector to provide financial services to the weak links in the economy including the agricultural sector, rural areas, farmers and small and micro enterprises, the PBC increased the central bank discount quota for certain branches by a total of 12 billion yuan, with a requirement that the increased amount must be used in its totality to support financial institutions to increase lending to the agricultural sector, rural areas, farmers, and small and micro enterprises.

The branches are also required to take effective measures to further improve the management of central bank discount, to guide the financial institutions to increase lending to the agricultural sector, rural areas, farmers and small and micro enterprises, and to reduce the cost of financing for the real sector.

First, the recipients of central bank discount will be optimized. The locally incorporated small and medium-sized financial institutions that have complied with prudential requirements will have priority status in central bank discount operations. Second, efforts will be made to boost financing of the agricultural sector, rural areas, farmers and small and micro enterprises. In the central bank discount operations, priority will be given to agro-related bills, bills issued or received by small and micro enterprises, bills that are accepted or held by small and medium financial institutions, and bills with a nominal value below 5 million yuan. Third, in the use of central bank discount quota, its efficiency will be improved.

The stock of credit asset will be mobilized while the increased amount of the quota will be used efficiently. Regional structure of central bank discount quota will be optimized based on the distribution of agro-related bills as well as those issued and held by small and micro enterprises. Fourth, the financial institutions will be guided to lower discount rate. To help reduce the financing cost of the real sector, the interest rate of central bank discount should be lower than the weighted average discount rate of the same maturity offered by the recipient financial institution to its clients in the same period. Fifth, there will be enhanced monitoring and assessment of the use of central bank discount.

The requirement is that the increased quota shall be used in its totality to support financial institutions to increase lending to the agricultural sector, rural areas, farmers, and small and micro enterprises. The type of discounted bills, the receiving industries, and the specificities of enterprises will be monitored and analyzed. The use, effect and risk management of central bank discount operations will be examined and assessed on a regular basis to make sure that the central bank discount operations serve to support the weak links in the real sector.