CBRC pushes for differentiated lending policy

China's banking sector should adopt differentiated financial policies for different industries so as to restrict lending to high energy-consuming and polluting sectors, and to those with overcapacity, while supporting environmentally friendly sectors, China Banking Regulatory Commission (CBRC) Chairman Shang Fulin said at a meeting Monday.

"From now on, the major emphasis in the work of the banking sector will be on resolving the problem of overcapacity," said Shang, speaking at a meeting to discuss green credit in Fuzhou, East China's Fujian Province.

The regulator will prohibit any fresh lending for projects in sectors burdened with overcapacity, and will stop offering loans to projects that have violated legal processes, Shang explained.

"The commercial banks have actually already become more cautious than before about lending to high energy-consuming and polluting industries and those with overcapacity, partly because the ratio of non-performing loans in the banking sector has hit a 10-year high," Jin Lin, a senior banking analyst with Orient Securities, told the Global Times Monday.

Around 10 commercial banks, including China Merchants Bank, Industrial Bank and China CITIC Bank saw quarter-on-quarter rises in their non-performing loan ratios in the third quarter, according to their quarterly reports.

By the end of September, the balance of non-performing loans for China Merchants Bank had reached 17.1 billion yuan ($2.8 billion), 46.22 percent higher than at the beginning of this year.

Commercial banks are themselves responsible for reducing the financial risks of lending to companies with uncertain prospects, Jin noted.

Shang also announced specific lending policies for sectors with overcapacity.

The regulator will support merger and acquisition (M&A) activity in sectors with overcapacity, with measures including extending the time limit for the repayment of loans for M&A deals, said Shang.

To diversify financing for M&A activity, the regulator is also encouraging enterprises to adopt a broader range of financing options, including trusts and syndicated loans.

Financial institutions will also be encouraged to offer more financing services, such as international factoring, to firms in sectors with overcapacity that are planning to transfer their business from the domestic market to overseas markets.