(Bloomberg) -- Chinese authorities asked the nation’s biggest banks to lower their deposit rates for at least the second time in less than a year, according to people familiar with the matter, marking an escalated effort to boost the world’s second-largest economy.

State-owned lenders including Bank of China Ltd., Industrial & Commercial Bank of China Ltd. and Bank of Communications Co. were last week advised to cut rates on a range of products, including on demand deposits by 5 basis points and three-year and five-year time deposits by at least 10 basis points, said the people, who asked not to be identified. The request was communicated through the central bank’s interest rate self-disciplinary mechanism, the people said.

Banks are assessing the request and may adjust rates as early as this week, said the people, adding that the move isn’t mandatory. Big lenders currently offer an annualized rate of 0.25% demand deposits, and 2.6% and 2.65%, respectively, on three-year, five-year time deposits.

The People’s Bank of China declined to immediately comment.

“China’s further monetary easing would have limited scope, given the Sino-US monetary policy split and the less effective monetary transmission,” said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc. “Cutting deposit rates could provide incentive and capacity to banks for more credit support. It also means reduced chance of policy rate cuts in the near term.”

China’s 10-year government bond yield slipped 1 basis point to 2.70% after the news. The onshore yuan weakened as much as 0.3%, touching a low of 7.1253 per dollar. 

The guidance, which follows similar rate reductions in September last year, will help alleviate pressure on lenders as they strive to balance shrinking margins and government directives to beef up lending support to the economy.

Beijing has rolled out a raft of measures to prop up the economy after a series of crackdowns on multiple industries and lengthy lockdowns due to Covid Zero. The authorities are seeking to boost lending to bolster a recovery after recent data showed a slowdown. 

After spiking in the first quarter, credit and new loans weakened in April as consumers and businesses curbed their borrowing. Households are saving more and paying down their mortgages, rather than taking on more debt, while businesses are faced with falling demand and declining profits.

Big lenders including ICBC and Bank of China last trimmed their benchmark deposit rates across the board in September for the first time since 2015. Smaller peers followed suit in April with rate reductions on some tenors.

Once the deposit rates cut take effect, it would lower costs of banks, enabling them to reduce lending rates over time. That, in turn, would make it more attractive for consumers and businesses to borrow. Lower deposit rates would also make it less attractive for consumers to park their cash at banks.

--With assistance from Amanda Wang, Nasreen Seria and Fran Wang.

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