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Banks running out of lending quota

By Ren Jie (chinadaily.com.cn)
Updated: 2010-05-31 15:46

Some Chinese banks have used up their lending quota for the second quater, and those which are running out of their quota may raise interest rates on new lending, the Shanghai-based Oriental Morning Post said on Monday.

The Bank of Nanjing has almost suspended all lending activities, the paper reported, quoting an inside source. The bank would not receive any further loan applications, and maybe unable to issue loans next month, the source said.

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An unnamed source also told the paper that both China Merchant Bank and the Bank of China had suspended issuing loans in March and April and only resumed lending just recently. It also said that banks would be ordered to stop lending if they ran out of their quota or their borrowing violated rules.

Some commercial banks turned to raising interest rates in a tighter credit market, and tended to approve loans with higher interest rates.

As the central bank starts tightening liquidity and commercial banks contract their lending, analysts believe new loans this year may be less than 7.5 trillion yuan, which was set as the target for new yuan-dominated lending in 2010, according to the China Securities Journal.