The People’s Bank of China is preparing to update the regulatory framework for RMB deposit and loan interest rates, reflecting the marketization of interest rates. Currently, loans are anchored to the LPR and deposits to a dual-anchor system of the one-year LPR and 10-year government bond yield. Experts anticipate that the new regulations will introduce a diversified benchmark system.
On May 11, the People’s Bank of China (PBOC) released the Monetary Policy Implementation Report for First Quarter of 2026 , highlighting international experiences in loan interest rate benchmarking. Earlier, on May 9, the PBOC announced its 2026 regulatory drafting work plan, which includes the development of the Regulations on the Management of RMB Deposit and Loan Interest Rates.
Industry experts have suggested that deposit and loan pricing benchmarks may be adjusted again in the future. Retail loan rates are likely to continue being anchored to the LPR, while corporate loan rates may reference the DR or the 10-year government bond yield. Deposit rates could also incorporate DR or Shibor as additional anchors.
DR refers to the interest rate at which banks obtain financing using government bonds as collateral, including overnight (DR001), 7-day (DR007), and 14-day (DR014) tenors. It is considered the most accurate and essential indicator of short-term interbank liquidity. Shibor, in contrast, is an unsecured, simple-interest rate used in wholesale interbank lending.
Deposit and Loan Benchmark Interest Rates May Be Phased Out
The current regulation governing RMB deposit and loan rates is the RMB Interest Rate Management Regulations, issued in 1999, over 20 years ago. Under this regulation, the PBOC sets and adjusts banks’ deposit and lending rates and the range of rate fluctuations.
For example, in October 2015, the PBOC lowered the one-year benchmark loan and deposit rates by 0.25 percentage points to 4.35% and 1.5%, respectively, while removing restrictions on rate fluctuations. If a bank offered a loan at 90% of the rate, the customer’s interest rate would be 3.915%.
In recent years, as interest rate marketization advances, the benchmarks for deposit and loan rates have evolved. Since August 2019, the LPR has served as the anchor for lending rates, while since April 2022, deposit rates have been guided by a combination of bond market rates, represented by the 10-year government bond yield, and the one-year LPR.
The LPR is published by 20 reporting banks, while the 10-year government bond yield is determined through market transactions. The PBOC no longer sets or adjusts banks’ deposit and loan rates, making the existing RMB Interest Rate Management Regulations outdated.
Wang Qing, chief macro analyst at Golden Credit Rating International, said that the PBOC is developing new regulations to create a clear set of rules and gradually establish a diversified benchmark system for deposit and lending interest rates, and the goal is to curb irrational competition among financial institutions in interest rate setting and improve the effectiveness of monetary policy transmission.
Zhang Lin, deputy director of Far East Credit Research Institute, said the regulation is being considered for several purposes: to strengthen interest margins and regulate loan pricing on the asset side, to curb excessive deposit competition and align pricing with interbank liability limits on the liability side, and to support the diversification of loan benchmarks through standardized terminology and implementation rules.
Although deposit and loan rates have shifted to new benchmarks in recent years, the original benchmark rates have been retained. As reforms continue, the market anticipates that these traditional benchmark rates may gradually be phased out.
Wang Qing noted that “the deposit and loan benchmark rates have not been adjusted since October 24, 2015, remaining unchanged for over a decade. The LPR has now fully replaced the loan benchmark as the primary reference for loan pricing, while deposit rates use a dual-anchor mechanism for market-based adjustments, those traditional benchmark rates may gradually be phased out.”
Loan Rates May No Lnger be Anchored Solely to LPR
The last round of interest rate marketization reform began in August 2019, when the central bank directed banks to use the LPR as the primary reference for new loans and as the benchmark for floating-rate loan contracts.
The reform involved two major changes. First, the loan pricing anchor shifted from the benchmark loan rate to the LPR. Second, the floating method changed from using multiples or discounts to an add/subtract point system. For example, if the current five-year LPR is 3.5% and a bank offers a loan at LPR minus 30 basis points, the borrower’s interest rate would be 3.2%.
However, after years of implementation, this mechanism has shown some shortcomings. An executive from a joint-stock bank told YT Finance that with all loans anchored to the LPR, any decline in the LPR automatically lowers all loan rates, making precise monetary control difficult, and different types of loans should not rely on a single benchmark.
The official added that, “to achieve more precise control, different loan rates are adjusted through self-regulation. Corporate loan rates must not fall below government bond yields, effectively adding a margin to bond yields. Mortgage loans follow local self-regulation rules—for example, in their province, rates cannot fall below LPR minus 35 basis points. Business loans, meanwhile, must remain above 3%.”
The PBOC’s 2026 First Quarter Monetary Policy Implementation Report suggests that loan rates may no longer be anchored exclusively to the LPR.
The report reviews international experience, highlighting that major economies have moved from a single loan pricing benchmark to a diversified system that reflects funding costs and credit risk, tailored to different borrowers, loan types, and financing scenarios.
For example, in the US, floating-rate loans for large corporations are mainly priced with SOFR (secured overnight financing rate based on U.S. Treasury repo transactions), while some small business loans and consumer loans in the retail sector still mainly use the PR (prime rate) as the pricing benchmark.
This suggests that China’s loan interest rate benchmarks may also shift from a single reference to a diversified system, reducing reliance on the LPR, and different benchmarks could be applied to various borrowers and loan types, improving rate adaptability and market responsiveness across scenarios such as corporate versus retail, short-term versus long-term, and fixed versus floating loans, said Zhang Lin.
Zhang Lin believes that in the future, corporate or large loans may mainly reference market transaction rates, following international SOFR practices, with more reliance on DR and other real transaction rates to reflect supply and demand accurately, while retail loans may continue using or simplify the current benchmark—for instance, personal mortgages and consumer loans may still use a simplified benchmark like the prime rate or directly anchor to policy rates.
Wang Qing said that in the future, loan interest rates could shift from relying solely on the LPR to a system with multiple benchmarks, including the LPR, short-term market rates (DR), and the 10-year government bond yield.
Wang believes that large corporate loans and longer-term loans may reference DR or the 10-year government bond yield for pricing, while retail and small-to-medium enterprise loans may continue using LPR or central bank policy rates as the main benchmark.
Differentiating pricing benchmarks for corporate and retail loans is mainly because corporations, especially large ones, have financing channels beyond loans, such as bonds, and if bond market rates are low, corporations will naturally issue more bonds.
Central bank data show that in Q1 of 2026, nearly 50% of loans were issued at LPR minus points, compared with 16% during the 2019 LPR reform. This suggests that, in response to declining bond market rates, a growing share of loans is being priced at LPR minus points.
GF Securities noted that if a market interest rate other than the LPR is selected as an additional loan pricing benchmark, it must accurately reflect banks’ funding costs and demonstrate low volatility to ensure banks are willing to adopt it, and this implies that the central bank will likely aim to keep money market rates relatively stable and limit volatility in the future.
Industry insiders recommend using DR or the 10-year government bond yield as the benchmark for corporate loans, since DR is derived from interbank secured bond repo rates, and both DR and the 10-year bond yield serve as key indicators of current market interest rates.
Deposit Rate Anchors may Also Change
After the August 2019 reform that changed the loan interest rate anchor, Liu Guoqiang, then vice governor of the PBOC, said that the deposit benchmark rate would be maintained for the foreseeable future, and the PBOC would guide the market-based self-regulation mechanism for interest rate pricing to reinforce discipline in deposit rate management.
In recent years, the method for setting deposit rates has also been reformed. The first adjustment came in June 2021, when the PBOC guided the interest rate self-regulation mechanism to optimize the formation of the self-regulated upper limit for deposit rates. The method changed from multiplying the deposit benchmark rate by a factor to adding a fixed number of basis points, bringing the quotation method in line with loans, which also use the add/subtract point system.
The second adjustment occurred in April 2022, when commercial banks began referencing the 10-year government bond yield as a benchmark for the bond market and the one-year LPR as a benchmark for the loan market when setting deposit rates.
Since then, deposit rates have been reduced multiple times, typically following the pattern of large banks first, joint-stock banks next, and city or rural commercial banks last. Currently, the one-year deposit rate at large banks stands at 0.95%, already 65 basis points below the one-year deposit benchmark rate.
“Today, the market rarely uses deposit and loan benchmark rates as a reference,” said an official from a joint-stock bank’s western branch.
Looking ahead, as the deposit benchmark rate may be phased out, the pricing anchor for deposit rates could also be revised.
Wang Qing said that the current core reference for deposit rate pricing is a combination of the 10-year government bond yield and the one-year LPR. In the future, the pricing benchmark could be expanded to include short-term market rates, such as DR, as a reference for short-term or interbank deposits.
Zhang Lin said that, under the central bank’s guidance to “reduce banks’ funding costs,” the pricing benchmark for short-term deposits may continue to rely on market-based adjustment mechanisms, referencing government bonds and the LPR, with gradual, small-step adjustments at both listing and execution levels, combined with re-pricing of existing deposits to steadily lower funding costs. In the medium term, the self-regulation constraint of “Shibor plus a capped spread” may be reinforced in the wholesale liability sector.
Shibor, the Shanghai Interbank Offered Rate, is calculated, published, and named using the technical platform of the National Interbank Funding Center in Shanghai. It is determined as the arithmetic average of RMB interbank lending rates independently reported by a panel of high-credit-quality banks.
Zhang Lin said that, overall, the reform could be promoted by aligning different types of liabilities with appropriate benchmarks, creating a tiered system in which retail deposits reference the LPR and government bond yields, while interbank deposits are anchored to Shibor plus spreads. This institutionalized approach would help stabilize interest margins and enhance monetary policy transmission efficiency.