Banks may raise lending interest rates to railway ministry

Updated: 2011-07-29 16:53

By Yu Hongyan (chinadaily.com.cn)

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Major Chinese banks may raise loan interest rates to the Ministry of Railways as much as 10 percent after the fatal train crash on July 23, the Chinanews.com reported Friday.

The report said that banks' lending to the ministry was offered with interest rates 10 percent lower than the benchmark interest rate in the past, due to the mega government agency's vast business scope.

The ministry's loans accumulated to 1.25 trillion yuan ($185.87 billion) by the end of 2010. It paid 25 billion yuan in interest that year, 19.3 billion yuan of which was bond interest, meaning the ministry's actuarial loan interest was only 5.7 billion yuan, said Chinanews.com.

The railway ministry is experiencing a credit crunch after the July 23 crash and continuous accidents on the Beijing-Shanghai high-speed railway, Li Xuming, a senior expert in the securities sector told Yangcheng Evening News.

Their adverse effects on the high-speed railway's passenger flow and capital flow will make banks take these factors into account, according to Li.

China's Ministry of Railways (MOR) was 1.98 trillion yuan ($294.87 billion) in debt at the end of the first quarter of 2011, causing its asset-liability ratio to reach 58.24 percent, according to a previous report.