BEIJING - China's central bank said Thursday it will cut the interest rates on standing lending facility (SLF), a liquidity support tool, for its local branches.

The interest rates of overnight and seven-day SLFs for local financial institutions will be reduced to 2.75 percent and 3.25 percent respectively from Friday, the People's Bank of China (PBOC) announced.

SLF is a tool created by the PBOC in early 2013 to provide a large amount of funding to banks when they face a liquidity squeeze and are unable to get sufficient financing from the interbank market.

Early this year, the PBOC authorized its branches across the country to conduct SLFs and offer short-term liquidity to qualified small- and medium-sized banks.

Thursday's move is aimed at helping make interest rates more market-based and is in line with the current liquidity situation, the PBOC said on its official micro-blog.

Previous SLF interest rate levels were not announced. The PBOC has not conducted any SLF since April, after pumping 335 billion yuan ($52.49 billion) of liquidity into banks in the first quarter of this year.