The rural credit cooperatives are in a disadvantageous position in competing for deposits, since the postal savings system not only has its own operational advantages but also enjoy favourable policies. To promote the development of rural financial services, we introduced the policy of allowing the rural credit cooperatives to set their deposit rate above the benchmark rate. Now we face some new issues.
First, since August 2003, the interest rate policy for the newly increased postal savings deposit has been changed, thus alleviating the problem of rural deposit competition. Second, the increase in deposit interest rate has narrowed the interest spread, resulting in difficult financial situation of some of the rural credit cooperatives.