Revise rules to improve lending environment

China unveiled several revised credit management rules recently, which will take effect from July 1.

They include measures for the administration of fixed-asset loans, working capital loans and personal loans.

Experts said the new rules fit the current situation and development trends of the credit business in China.

The rules will also prod commercial banks to further improve credit management, thereby improving the quality and efficiency of financial services in a way that will benefit the real economy, they said.

Opinions of members of the public on the revised draft rules were sought from Jan 6 to Feb 6 in 2023. The rules received wide attention and feedback from financial institutions and scholars as well. Thereafter, some changes were made to the draft version, the National Financial Regulatory Administration disclosed on its website.

An official of the NFRA said the new rules have broadened applications of fixed-asset loans and working capital loans, as well as clarified the applicable scenarios of the rules.

The new rules also cover all the justified loan-funding demands in the market while defining eligible borrowers, to effectively meet the financing demands of different market entities.

Apart from improving scale standards of entrusted payment and extending the time limit, the rules clarify the forms of video interviews and off-site investigations, to meet the demand for online procedures of credit issuance and adapt to new financing scenarios.

As for fixed-asset loans, working capital loans and personal business loans, the new rules state that the lenders may appropriately simplify procedures of entrusted payment for borrowers with a good record who have reasonable and urgent funding needs within the framework of loan contract, if the lenders assess that the risk is controllable.

The new rules stipulate the liability for breach of contract by borrowers if they use the loans for purposes other than the stated ones. They also allow lenders to take measures like early recall of loans, adjustments on loan payment methods and interest rates, collection of penalty interest, reduction in credit cap, and suspension or termination of loan disbursement.

Dong Ximiao, a researcher at Merchants Union Consumer Finance, said the new rules will make up for the shortcomings in the current regulations, and will help improve efficiency and quality of financial services to better serve the real economy, as well as to prevent and defuse financial risks in a better way.

"The revisions have taken full consideration of market entities and financial institutions' needs and respond to the new changes of credit procedures and business scenarios underpinned by the development of technologies," Dong said.

"That makes the new rules fit well with the financing practices in reality, and can provide solid support to quality financial innovations, which will eventually promote the development of digital finance, reduce financing cost and improve efficiency in financial resource allocation."