China may allow small rural lenders, which are currently only allowed to issue loans, to restructure into village banks or lending companies, as the country moves further to improve financial services in rural areas.

Jiang Dingzhi, vice chairman of the China Banking Regulatory Commission (CBRC), said on Wedensday the qualified small lenders in rural areas could restructure according to the requirements of the commission.

However, he did not offer details on the qualifications of the lenders or possible procedures involved.

Jiang also said the nationwide expansion of rural banks with both foreign and domestic capital should be carried out "steadily", instructing local watchdogs to allow one or two financial institutions to begin trial operation in each province as an initial step.

The CBRC announced earlier this month that it would extend its pilot project of building more rural financial institutions to all the country's regions.

Previously, only six provinces were included in the pilot program to allow foreign and domestic banking capital to invest in, purchase or establish banking institutions in rural areas.

Jiang stressed that the establishment of new rural financial institutions should serve the agriculture sector and the rural areas and he emphasized steady expansion to avoid an irrational boom of rural financial institutions.

So far, 23 rural financial institutions in the pilot areas have opened for business, including 11 village banks, four rural loan organizations and eight rural cooperative fund associations.

Jiang said eight of the total 23 have begun to report profits.

Chinese farmers and rural enterprises currently have few places to access funds for their businesses. Official figures show Chinese farmers rarely obtain loans above 5,000 yuan (US$666.7).

After the government lowered the working capital limits for domestic financial institutions to establish branches in rural areas, a couple of village banks were established in pilot areas this year.

HSBC got the green light from the CBRC to set up a village bank in Hubei Province, becoming the first foreign bank to set foot into the nation's vast rural financial market.