RPT-China cash rates lower as c.bank promises to backstop market
* PBOC statement softens hard-line stance
* Central bank says gave loans to some banks
* Pledges to respond actively to liquidity changes
* Money market rates edge down but remain elevated
SHANGHAI, June 26 (Reuters) - China's short-term borrowing rates fell for a fourth day on Wednesday morning after the central bank appeared to admit it had underestimated the severity of a credit crunch last week and had already provided extraordinary support to some institutions. In an unusual statement late on Tuesday, the central bank signalled that while it was ready to act again as the lender of last resort for banks caught in a short-term squeeze, it was not changing its stance of tightening market conditions as it seeks to rein in sharp growth in informal lending. "Market liquidity shortage has not reversed dramatically despite the PBOC's softened stance, and isn't expected to improve much until mid-July," said a money-market dealer at a Chinese commercial bank in Shanghai. "The PBOC said it had offered liquidity to some banks, but few in the market know which banks obtained the help." The benchmark seven-day repo rate fell slightly to 7.20 percent on a weighted-average basis, down from 7.44 percent on Tuesday. The overnight repo rate fell 31 basis points to 5.51 percent. Stocks were weaker, however, with the CSI300 of the leading Shanghai and Shenzhen listings down 0.8 percent in early deals. The People's Bank of China (PBOC) said on Tuesday it would actively inject cash "based on the market's actual situation" and would "adjust banking system liquidity in a timely manner". Such commitments contrast with the PBOC's stance last week, when it withdrew funds from the market even as short-term lending rates rocketed upwards. "Market sentiment has apparently improved somewhat, although the PBOC is still expected to stick to relatively tight liquidity policy," said a dealer at a major state-owned bank in Shanghai. The revelation that the People's Bank of China had supported unnamed individual institutions came after outages at automatic teller machines and Point of Sales terminals at two of China's largest banks caused concern among the public. At the same time, the PBOC again warned banks that they needed to manage their liquidity more carefully and protect against risks of reliance on short-term borrowing.