China's central bank said Friday that it has decided to moderately expand the scope of securities as collateral for a lending tool in an effort to boost support for small enterprises and green economy sectors.

The People's Bank of China (PBOC) said during the medium-term lending facility (MLF) operations, it will admit more types of securities as collateral, including green loans as well as corporate bonds issued by small and micro firms and green finance bonds that rated at least AA.

Previously, the central bank accepted treasury bonds, central bank bills, local government bonds, corporate credit debt rated at AAA, amongst others as collateral during the MLF operation.

The MLF tool was introduced in 2014 to help commercial and policy banks maintain liquidity by allowing them to borrow from the central bank using securities as collateral.

The PBOC said the move will encourage financial institutions to enhance financial support for small and micro businesses as well as green economy sectors.

The central bank will continue to implement the prudent and neutral monetary policy, maintain a reasonable and stable level of liquidity, and ensure the steady and moderate growth of credit and social finance to create a favorable monetary and financial environment for the high-quality development and supply-side structural reform, it said on its website. 

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