China cancels some banks' punitive reserves: Sources

China has reversed punitive increases of required reserves previously imposed on several banks, because they were more cautious in issuing loans in February, two sources told Reuters on Tuesday.

The sources, who were familiar with the details, did not name the banks. They said the change was part of China's "dynamic differentiated required reserve ratio" system. "If the pace of lending is reasonable, and indicators like capital adequacy ratio are normal, then it is natural to lower RRR," one source told Reuters. The official Xinhua news agency reported in February that the People's Bank of China had imposed punitive reserve increases on more than 40 banks this year to tame aggressive lending.