Agricultural Bank of China, the mainland's third-biggest state-owned commercial lender by assets, is set to roll out a new range of rural services, including leasing, insurance and loan products, according to vice-president Zhang Yun.
Mr Zhang did not set a timetable for the introduction of the new services, but said investment in the new operations would depend on the results of trials.
He said the Ministry of Finance and the China Banking Regulatory Commission had given the lender approval to set up rural banking units in Inner Mongolia and Hubei province. The units would start operations soon, he said.
The bank decided to explore opportunities at the county level by building on its strength in the rural sector. It has the largest number of agriculture-related customers and loans, compared with other banks.
The bank had issued 1.36 trillion yuan (HK$1.5 trillion) in loans to the agriculture industry by the end of last month, up 88.1 billion yuan from January, with the new portion forming 40 per cent of its total new loans.
Mr Zhang said the new rural loans would account for half of the bank's total in the next three years, outpacing growth in other bank services.
In September last year, the bank launched trial rural finance services in eight provinces including Jilin, Anhui and Sichuan, and the results were positive with a 0.27 per cent non-performing loan rate, he said.
'[The bank] will spearhead financial services in rural areas over the next 10 years,' Mr Zhang said.
The bank posted a robust 39 per cent increase in first-half operating profit to 54.3 billion yuan. Bloomberg said the bank's non-performing loan ratio dropped to 22.41 per cent at the end of June, and its bad loans totalled 823.1 billion yuan.
Mr Zhang did not say whether the rural finance arm would be part of a soon-to-be-created public company.
Agricultural Bank is the last of the four big state-owned commercial banks to receive a government bailout, and Mr Zhang declined to comment on long-standing plans for the bank's financial restructuring.
A banking source said Agricultural Bank was going ahead with shareholding reforms, focusing on non-performing assets estimated at more than 800 billion yuan, and on the business shift towards the agriculture sector.
Mr Zhang said the bank needed policy support from the government similar to the fiscal, monetary and supervisory support underpinning rural credit co-operatives.
The central bank had tightened its credit controls in recent years, so Agricultural Bank and other commercial lenders were subject to a 17.5 per cent reserve requirement ratio, while rural co-operatives' reserve requirement ratio was 13 to 15 per cent, Mr Zhang said.
The bank will soon open rural bank units in Inner Mongolia and Hubei
Agbank's loans to the agriculture industry stand at, in yuan: 1.36tr yuan