The 5-year term remains unchanged, benefiting short-term financing for enterprises. In August, LPR once again lowered the loan | interest rate | enterprise
On August 21, 2023, the loan market quotation interest rate for August 2023 was announced - the one-year LPR was 3.45%, a 10 basis point decrease from before, and the five-year and above LPR was 4.20%, unchanged from before.
This is the second downward adjustment of LPR since 2023, which was previously done in June. On August 15th, the People's Bank of China launched a 204 billion yuan open market reverse repurchase operation and a 401 billion yuan medium-term lending facilitation operation. The one-year MLF winning bid interest rate was lowered from 2.65% to 2.50%, a decrease of 15 basis points. Due to the fact that LPR is quoted by various quoting banks based on open market operating rates, it is widely believed in the industry that the LPR is likely to decrease in August as well.
The LPR reduction this time is also in line with the current policy direction. On August 18th, the People's Bank of China, the State Administration of Financial Regulation, and the China Securities Regulatory Commission jointly held a video conference. The meeting emphasized that financial support for the real economy should be sufficient, with a stable pace, optimal structure, and sustainable prices. Major financial institutions should take the initiative to take action, increase loan disbursement efforts, and state-owned large banks should continue to play a pillar role. We should pay attention to maintaining a stable pace of loan growth, appropriately guide and smooth out credit fluctuations, and enhance the stability of financial support for the real economy. We should pay attention to exploring new credit growth points, vigorously support key areas such as small and medium-sized enterprises, green development, technological innovation, and manufacturing, and actively promote the transformation of urban villages and the construction of public infrastructure for both emergency and emergency use. Adjust and optimize real estate credit policies. We must continue to promote the stable and moderate reduction of financing costs in the real economy, standardize the pricing order of loan interest rates, and comprehensively consider the price relationship between increment, stock, and other financial products. Give full play to the important role of the market-oriented adjustment mechanism for deposit interest rates, enhance the sustainability of financial support for the real economy, and effectively play the positive role of finance in promoting consumption, stabilizing investment, and expanding domestic demand.
The full name of LPR is Loan Prime Rate, which provides pricing reference for bank loans. At present, LPR includes two varieties: 1-year and 5-year and above. A one-year LPR is usually the reference benchmark for banks to provide liquidity loans to enterprises and individuals, while a 5-year or more LPR is the reference benchmark for medium and long-term loans, such as enterprise medium and long-term loans, personal housing mortgage loans, etc.
With the further reduction of the one-year LPR, various short-term loan interest rates closely related to LPR will also experience a new wave of adjustment. For example, short-term financing for enterprises, consumer loans, and other interest rates will decrease, which will directly reduce the financing costs of enterprises, stimulate personal credit demand, and boost household consumption and investment.
