China's banking watchdog issued a set of regulations Wednesday, aiming to tighten supervision of the country's booming peer-to-peer (P2P) lending industry.
The document imposes 13 restrictions on P2P platforms, prohibiting them from accepting public deposits, pooling investors' money for their own projects, providing guarantees for lenders, or selling financial products, according to the China Banking Regulatory Commission's (CBRC) website.
The move will help ensure the healthy development of the P2P lending industry, prevent financial risks and protect investors' legitimate interests.
P2P lending, lenders without a traditional financial intermediary such as a bank, has seen rapid growth in China in the past few years, as investors seek higher returns, and small businesses find it easier to secure funds through P2P platforms.
The lack of supervision, however, causes considerable risks. Fraud, fund flight and illegal fundraising are common, and some investors have been left out of pocket as many P2P platforms went bust.
At the end of June, there were 2,349 lending platforms in normal condition. A total of 1,778 others had operational problems, accounting for more than 40 percent of the total.
Outstanding loans issued by P2P platforms (in normal condition) reached 621.3 billion yuan (about 93.6 billion U.S. dollars) at the end of June, according to CBRC data.
Loans provided on P2P platforms should not exceed certain amounts, according to the document.
An individual is allowed to borrow up to 200,000 yuan on one P2P platform, and up to 1 million yuan over several platforms. For companies and organizations, the ceilings are set at 1 million yuan per platform and a maximum of 5 million yuan over several platforms, said Li Junfeng, an official with the CBRC.
Under the regulations, P2P platforms are allowed to introduce third-party organizations to provide guarantees or launch business cooperation with insurers.
These platforms must disclose basic information about borrowers and financial projects to lenders, and their websites must include information on the number and volume of transactions and the bad lending rate.
A blacklist will be also be introduced, which will bar certain people and institutions from engaging in P2P lending, while allowing room for the industry to grow.
P2P platforms will not be allowed to operate offline. The CBRC will supervise the daily operations of P2P platforms and will be responsible for the formulation of industry policies and regulations. Local financial authorities will also be responsible for the supervision of local P2P platforms, according to Li.
