* Brazil mulls steps to spur long-term lending: source
* Says a deeper debt market needed to boost lending
* Certificates of deposit might be target of changes
By Patrícia Duarte
SAO PAULO, March 14 (Reuters) - Brazil is considering steps to boost long-term lending that could help lower the country's interest rates, a government source said on Wednesday.
Brazil is evaluating measures to discourage the purchase of short-term securities known as interbank certificates of deposit (CDBs) in favor of lending with longer maturities, the source said.
Some government officials say the wide availability of CDBs effectively discourages banks from lending at lower interest rates.
Brazil's President Dilma Rousseff has made lower interest rates one of her top priorities this year after mediocre economic growth of just 2.7 percent last year.
CDBs are securities with very short term maturities that banks use to fund day-to-day operations. They pay high returns and bear relatively low risk.
"It is quite a challenge to lengthen those maturities ... We must strive to have a more solid debt market" in Brazil, said the source.
The official, who spoke on condition of anonymity because the measure was not final, declined to provide details of how exactly the purchase of CDBs would be discouraged.
Rousseff has taken several steps such as budget cuts to provide space for the central banks to cut interest rates without causing inflation.
The source said Brazil could also incentivize the purchase of so-called letras financeiras, or local currency-denominated notes issued by banks.
The notes, known in Brazil as LFs, are exempt from paying reserve requirements - the amount of money that is left at the central bank's coffers to soak up excess liquidity in the money markets.
Bankers are expecting government policymakers to use reserve requirements to direct credit allocation. They fear that too fast a reduction in interest rates could drive depositors to migrate to savings accounts and other tax-exempt instruments - making funding more expensive for them.
The central bank has recently exempted some instruments such as the purchase of small- and mid-sized banks' loan books from the calculation of reserve requirements, to help funnel more liquidity into those lenders.
The central bank has slashed the overnight Selic lending rate five times since August to 9.75 percent from 12.50 percent. The rate is now closer to a record low 8.75 percent between 2009 and 2010.