The Reserve Requirement Ratio (存款准备金率) is the share of deposits that banks must hold as reserves with the PBOC. It is one of the PBOC's primary monetary policy instruments.
Why it matters: RRR cuts release liquidity into the banking system, enabling more lending. The PBOC differentiates between large and small institutions, with small banks enjoying a lower requirement. Each 50bps cut typically releases approximately 1 trillion yuan of long-term liquidity.