China's central bank said on Monday that it will lower the collateral requirement for medium-term lending facility (MLF) loans starting from this month.

The move aims to increase the size of tradable bonds and ease the pressure on supply and demand of bonds in the market, the People's Bank of China said in a statement on its website.

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 starting from this month, institutions participating in MLF operations and planning to sell medium to long-term bonds can apply for the lower or exemption of collateral requirement for a certain period of time.

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