(Yicai) Feb. 19 -- China’s loan prime rate, which is the benchmark lending rate to which mortgages and corporate loans are tied, could still be trimmed in February following a cut in the reserve requirement ratio earlier this month, even after the central bank left the rate on a key policy rate unchanged, several economists said.

In the best-case scenario, the one-year loan prime rate could be lowered by up to 5 basis points this month and that of the five-year LPR by up to 10 bps, Dong Ximiao, chief researcher at Merchants-Unicom Consumer Finance, told Yicai yesterday. And in a more cautious scenario, the one-year loan prime rate could stay unchanged while the five-year one is lowered by 5 bps.

The People's Bank of China retained the 2.5 percent rate on CNY500 billion (USD69.5 billion) of one-year medium-term lending facility loans yesterday, adding a net CNY1 billion into the banking system, and marking the 15th consecutive month of injecting more MLF loans as they mature.

And it trimmed the reserve requirement ratio for financial institutions by 0.5 percentage point on Feb. 5, injecting CNY1 trillion (USD139 billion) into the open market.

The lowering of the reserve requirement ratio has helped banks reduce their funds-related costs, and, together with lenders' voluntary lowering of deposit rates, is helping bring down the loan prime rate, said Li Xunlei, chief economist at Zhongtai Securities.

The loan prime rate, which is reset by banks on the 20th of each month depending on open-market operations, is usually tied to the MLF rate of the same month. But China has lowered the loan prime rate before without altering the MLF rate, Li said.

In January, the central bank also lowered the interest rates on refinancing and rediscounting by 0.25 percentage point for banks to support farming and micro and small companies.

Since December last year, the country’s large state-owned banks have cut the one-year deposit rate by 10 bps to 1.45 percent and slashed the three-year and five-year rates by 25 bps to 1.95 percent and 2 percent respectively.

Editors: Dou Shicong, Kim Taylor