China's central bank adds liquidity via reverse repos, RRR cut

China's central bank conducted 100 billion yuan (about 14 billion U.S. dollars) of 14-day reverse repos at an interest rate of 1.95 percent Monday.

The People's Bank of China (PBOC) on the same day reduced the reserve requirement ratio (RRR) for financial institutions by 0.5 percentage points, which is set to unleash about 1 trillion yuan of long-term liquidity.

This came as the PBOC announced last month to ax the RRR, the re-lending and re-discount interest rates for the rural sector and small businesses to shore up the economic recovery and confidence.

A reverse repo is a process in which the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future.