Pursuant to the draft People's Republic of China Commercial (Amendment) Act, the loan to deposit ratio (LDR) will be made a reference rather than a regulatory index.

Anbound’s research team is of the view that the abolishment of LDR regulation does not mean that the bank can now embark on a lending spree. This is because the bank is still subject to restrictions such as capital adequacy ratio and the borrowing limit.

The weak borrowing is largely caused by the weak economy and the lack of efficient financing body in the market. It is not rare to see weak borrowing despite ample liquidity available in the market.

LDR is not a direct constraint nor does it the only constraint. One should not exaggerate the impact arising from the scrapping of LDR cap.