New Delhi, Nov 20 (KNN) China's central bank cut interest rates on Friday in another attempt to resuscitate a slowing economy. The People's Bank of China (PBOC) said on its website that it was lowering the one-year benchmark bank lending rate by 25 basis points to 4.35 percent, effective from Oct 24. This comes in the background of U S Federal Bank considering a hike in interest rate in its December board meeting.
 
To safeguard the commercial Banks earnings from interest, the one-year benchmark deposit rate was also lowered by 25 basis points to 1.50 percent. In its most aggressive policy easing since the 2008/09 global financial crisis, the Chines leaders are trying their best to reverse the trends of weak demand and excessive industrial capacity, as growth looks set to slip to a 25-year-low this year of under 7 percent. Consequently, the Chinese offshore yuan fell against the US dollar on Friday. China's offshore yuan hit a four-week low of 6.3958 to the dollar after the decision.
 
The reserve requirement ratio (RRR) was also cut by 50 basis points for all banks, taking the ratio to 17.5 percent for the biggest lenders, while banks that lend to agricultural firms and small companies received another 50-basis-point reduction to their RRR.
 
The move will create more hurdles for Indian exporters particularly MSMEs who are facing stiff rate competition from Chinese producers, backed by the easy money policy, in the areas of manufactured goods. On the commodity side, fresh safeguard duties are feared on base metals and materials to protect the bulk manufacturer which will only increase the cost of production of India MSMEs.
 
Already demands are rising for further easing of the interest rates by the RBI particularly when the inflation is showing a downward trend. (KNN/ DB)