The State Council, China's cabinet, moved to scrap a rule that caps lending by commercial banks at 75 percent of their deposits, a measure that will increase the supply of cash in the financial system.

It will propose amending the nation's banking law to make the limit a ratio used for reference rather than a regulatory statute, according to a statement posted to its website on Wednesday.

A system will be set up to monitor the liquidity of banks based on the ratio, it added. Changes to the law need to be approved by the Standing Committee of the National People's Congress.