On Tuesday, in a bid to maintain liquidity in the system, the People’s Bank of China infused a total of 175 billion yuan (USD 24.7 billion) into the banking system through reverse repo operations.
As per media reports, the amount consisted of 113 billion yuan of seven-day reverse repos at an interest rate of 2 per cent. The said operation also consisted of 62 billion yuan of 14-day reverse repos at an interest rate of 2.15 per cent.

A reverse repo (also known as a reverse repurchase agreement) is a process through which the central bank of the country purchases securities from commercial banks to maintain their liquidity levels. Also, the central bank agrees to sell them back the securities at a future date.

The People’s Bank of China said the move aimed at keeping liquidity stable in the banking sector at the end of a turbulent third quarter. It is also part of the larger liquidity injections by the central bank as it moves to shore up slowing economic growth in the country.

Last week, the People’s Bank of China reduced the borrowing cost of 14-day reverse repos and pledged to increase cash injections amid higher demand towards the end of the quarter.
Moreover, the move was a follow-up to the PBoC’s decision in August to trim key interest rates in a bid to support sluggish economic growth in the country. It is to be noted that Chinese economic activity has declined drastically this year in the face of continued disruptions from COVID-related lockdowns.