BEIJING - The People's Bank of China said on Monday that it starts using outright reverse repos, a tool of open market operations, to keep liquidity reasonable and ample in the banking system. 

The PBOC said in a statement it had activated the open market outright reverse repo operations facility to "maintain a reasonable abundance of liquidity in the banking system and further enrich the central bank's policy toolbox".

The new lending tool is to inject more liquidity into the market and support credit flow in the banking system.

The PBOC said it would use it to trade with primary dealers in open market operations on a monthly basis.

The announcement said the new tool would have a tenor of less than one year, longer than those for regular reverse repo operations, which typically have tenors of seven, 14 or 28 days, are conducted daily and normally require collateral.

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State-owned Shanghai Securities News said in an article published shortly after the PBOC notice that the new tool would cover three-and six-month tenors and aid liquidity adjustments over the next year, citing people close to the central bank.

"The central bank's choice to launch this new tool at this time is also expected to be a better hedge against the concentrated expiry of medium-term lending facility before the end of the year," the article reads.

With Reuters inputs