China's central bank said Friday that it has decided to cut the reserve requirement ratio (RRR) for eligible financial institutions by 0.25 percentage points to keep liquidity reasonably ample and lower comprehensive financing costs.

The cut will take effect on Dec. 5, except for financial institutions that have already implemented a 5-percent RRR, the People's Bank of China (PBOC) said in a statement.

The reduction in the cash amount that banks must hold in reserve is expected to free up 500 billion yuan (about 70.09 billion U.S. dollars) in long-term liquidity, said the PBOC.

After the reduction, the weighted average RRR for Chinese financial institutions will stand at about 7.8 percent, the central bank said.

The PBOC said it will enhance the implementation of a prudent monetary policy, strengthen support for the real economy, avoid "flood-like" stimulus, and better utilize monetary policy tools to adjust both the monetary aggregate and the monetary structure.

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