Commercial Banks Urged to Open Up More Lending to Small Businesses

Commercial Banks Urged to Open Up More Lending to Small BusinessesBanking regulators are urging commercial banks to increase lending to riskier small and medium businesses and the rural sector even if the banking sector have reported an increase in troubled loans for the first quarter. Commercial banks should utilize the government current policy that supports the further improvement of financial services to micro and small businesses.

According to the vice chairman of China Banking Regulatory Commission Zhou Mubing that China’s commercial bank non performing loans ratio for small businesses lending is at 3 to 4 percent around twice the overall average. This is natural since lending for small businesses carries higher risks. Banking regulators issued notices that encouraged lending to smaller businesses in the last two years and in 2014 regulators freed liquidity by adjusting the loan to deposit calculations for lending.

China’s banking regulatory commission has a higher tolerance for bad loans to small businesses and banks are not necessary responsible for higher NPL levels to the sector just as they follow necessary procedures. The commission also reported separately that lending has increased by 139 billion yuan during the first quarter to 982 billion yuan a 52 percent increase in bad loans compared to 12 months earlier.

NPL ratio for China’s commercial banks has increased 15 basis points in the past three months period to 1.39 percent. And last month the five biggest listed State owned lenders reported higher first quarter NPL ratios while the profit growth dropped below 2 percent. Loans to micro and small business increased to 21.41 trillion yuan in the first quarter or up by 17 percent compared a year earlier faster than the average loan growth rate.

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