China issues draft rules for online micro-lending business


The draft rules from the People's Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) seek to increase the bar for micro-lenders to be able to provide online loans directly to consumers or jointly with banks, while limiting the amount they can lend.

BEIJING: China's central bank and regulators issued draft rules on Monday to boost the oversight of online micro-lending as it tries to rein in rising debt levels in the coronavirus-hit economy.

The draft rules from the People's Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) seek to increase the bar for micro-lenders to be able to provide online loans directly to consumers or jointly with banks, while limiting the amount they can lend.

Regulators are sharpening their focus on banks that heavily use micro-lenders or third-party technology platforms like Ant Group to underwrite consumer loans, amid fears of rising defaults and deteriorating asset quality. Chinese banks' consumer loans sourced via tech firms reached 1.43 trillion yuan ($213.71 billion) as of end-June, according to the PBOC.

The draft, which is open for public feedback until Dec. 2, set a new requirement for small online lenders to provide at least 30% of any loan they fund jointly with banks.

They also set a 5 billion yuan registered capital threshold for micro-lenders that offer loans online across different regions. The current threshold varies between provinces but is well below 1 billion yuan.

Micro-lenders which source borrower data from e-commerce platforms to assess their credit will be required to share the credit information with the central bank, according to the draft rules.

Analysts expected banks to turn more cautious about providing joint loans with fintech lenders to consumers as a result.

Guo Wuping, head of the consumer protection division at CBIRC said in a commentary on Monday that the rights of users of Ant-owned consumer loan companies Huabei and Jiebei deserve close scrutiny. Guo said such fintech loan companies effectively perform the functions of banks and should adopt similar risk controls.

Licenses for eligible lenders will be renewed every three years, according to the draft rules, which said regulators will in principle not approve new micro-lenders that lend online across regions.

Lenders will have 12 months to comply with the new rules once it becomes official. ($1 = 6.6914 Chinese yuan) - Reuters

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3

   

Next In Business News

Censof stages turnaround with RM26.8m net profit in FY21
Carlsberg Malaysia posts Q1 net profit of RM66.46mil
Zafrul: Keeping economy open crucial to avert unemployment
Petronas to boost digital transformation
FBM KLCI up 7.86 points to end at intraday high
GDB 1Q net profit up nearly 54% to RM8.8m
MARC affirms rating on Sinar Kamiri RM245m green sukuk
MEF: Stricter MCO in Selangor crucial but don’t impose full lockdown
Grab Malaysia introduces programme to assist small food businesses
Gold extends rally as weak dollar, inflation jitters lift appeal

Stories You'll Enjoy


Vouchers