China's central bank may ask city-level commercial and rural lenders to deposit money with it for the first time in 20 years in order to absorb cash from the market, the Shanghai Securities News reported today quoting unidentified sources.

The People's Bank of China will probably pay the lenders interest of 2.91 percent for three-month deposits and 3.44 percent for one-year deposits, the same rates for its bills of equivalent tenure, the report said.

The bank required five billion yuan (US$666 million) in deposits from its Guangdong branch and rural banks in 1987 and 1988 to adjust the credit structure.

The amount may not exceed 100 billion yuan this time, the report said.

The bank on October 13 raised reserve requirements for commercial lenders for the eighth time this year in a continuing effort to mop up liquidity and curb loan growth.

The reserve ratio - the amount of money a commercial bank must park at the central bank - will increase 0.5 percentage points on yuan deposits to 13 percent starting October 25.

The central bank also conducts weekly auctions of bills to drain excess cash from the banking system.

(Shanghai Daily October 17, 2007)