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Bank gets tough on home loan practices
( 2003-09-30 10:54) (eastday.com)

The Agricultural Bank of China, one of the country's big-four lenders, has started a national inspection of its housing loans sector. The move is in line with the central bank's requirement.

The head office of the Agricultural Bank in Beijing said in a circular last week that all of its branches on the Chinese mainland should begin scrutiny on their lending businesses to the property sector in a bid to ensure its healthy development.

"Housing loans extended since the beginning of this year are targeted in the inspection," said the circular. "In regions where the real estate market tends to be overheated, we should take a cautious manner in providing housing loans."

Bubbles are thought to exist in Beijing and Shanghai, in addition to Liaoning, Guangdong and Zhejiang provinces, said BOC International (China) Ltd.

"The severest problem in the housing-loan sector is that developers rely heavily on bank lendings to complete their projects," said BOC International in a report.

It is estimated that about 60 percent of developers' investment in housing projects comes from bank loans on China's mainland, said the report.

The people's Bank of China reiterated in June that only developers who invest more than 30 percent of their own funds to the total project budget are qualified to apply for loans.

The agricultural Bank said that it has carried out measures to prevent its branches from extending housing loans to developers who cannot meet the 30 percent requirement.

The agricultural Bank reported its nonperforming loan ratio stood at 30.07 percent by the end of the first half of this year, down 4.99 percentage points as compared to a year earlier.

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