(Yicai Global) Jan. 23 -- The People's Bank of China has conducted its first ever targeted medium-term lending facility,  using the new monetary tool to lend banks CNY257.5 billion (USD37.8 billion) to provide financial support for small companies.

The interest rate on the TMLF is 3.15 percent, 15 basis points lower than the usual MLF rate, the central bank said in a statement. It will last for one year, but banks can extend the term twice after it matures. The PBOC unveiled the new lending tool last month to provide stable, long-term funding for banks to help small and private enterprises.

Debuting the new tool follows on from the PBOC's decision to cut the reserve requirement ratio in order to spur liquidity before the Chinese New Year, a week-long holiday for which celebrations start on Feb. 4 this year.

The central bank cut the rate by 0.5 point on Jan. 15 and is set to do the same again on Jan. 25, releasing a total CNY1.5 trillion (USD220.6 billion) into the financial system.

Editor: James Boynton