China's central bank is pumping about 400 billion yuan (nearly $65 billion) into the country's banking system, according to people with knowledge of the matter, the latest step aimed at boosting Chinese banks' lending abilities to help spur the economy.

The People's Bank of China is making the injection via a major policy bank, China Development Bank, which then lent the funds in the form of short-term loans to other banks in the interbank market where banks borrow from each other, the people said.

The action comes as some 500 billion yuan in loans made in September by the central bank to the country's top five state-owned banks is coming due this month. The PBOC hasn't publicly disclosed the fund injection--which started on Wednesday--for fears of sending the market too strong a signal that it is broadly loosening its monetary policy, according to the people.

Chinese banks have been calling for the central bank to free up funds to bolster their abilities to lend, as their profitability comes under increasing pressure. Specifically, the banks are pressing the PBOC to lower the share of deposits banks must set aside against financial trouble, known as the reserve-requirement ratio.

In past slowdowns, the PBOC has lowered the reserve requirements to boost credit. But the central bank has refrained from doing so this year even as it cut its benchmark lending and deposit rates last month. Chinese officials and advisers to the central bank say it fears lowering the requirements could lead to too much credit flowing into sectors that have already suffered overcapacity, such as steel and real estate.

Still, many economists expect the PBOC to reduce the reserve requirements soon to help banks to lend more.

MarketWatch