Beijing orders banks to relax bad debt ratio for loans made to small companies
- Banks can loosen NPL ratio tolerance for small companies by 3 percentage points, China’s top banking regulator says
- Move seen as helping to shore up private sector, a generator of 80 per cent of jobs in urban areas
China’s top banking regulator has ordered commercial banks to relax their tolerance over non-performing loans (NPLs) owed by small companies, reflecting the latest move by Beijing to support private companies amid the deepening economic slow down.
Commercial banks can loosen the NPL ratio tolerance for “inclusive small companies” by 3 percentage points, according to a guideline published by the China Banking and Insurance Regulatory Commission (CBIRC) on its official website on Wednesday.
The relaxation will apply to companies with credit lines from banks under 10 million yuan (US$1.5 million).
Analysts said it was rare for the nation’s top banking regulator to become directly involved in issuing directives to local banks.
“Previously, local banking regulators will give guidance to banks when the government wants to boost credit, while the rise in NPL tolerance is usually capped by 2 percentage points. This time it is the top regulator making a written requirement,” said Chen Shujin, chief financial analyst at Huatai Financial Holdings in Hong Kong.
At the end of 2018, the NPL ratio of commercial banks stood at 1.83 per cent, 0.04 percentage points lower than the end of September.
The guideline also emphasised new lending targets issued by Premier Li Keqiang earlier this month.