The (PBC) and China Banking
Regulatory Commission (CBRC) jointly revised rules governing
auto loans Tuesday, strengthening commercial banks' risk prevention
capabilities. Growing numbers of auto loan defaults have been
frustrating the banks.
The new rules are also expected to help boost the nation's auto
sales, promoting domestic consumption as the state tries to reduce
excessive capital investment while maintaining appropriate economic
growth, according to the PBC, China's central bank.
The new loan regulations, to go into effect on October 1, allow
all commercial banks, credit cooperatives and qualified non-banking
financial institutions to offer auto loans.
The outgoing regulations, which were enacted in 1998, originally
allowed only the four state-owned commercial banks to lend money
for auto purchases. Other Chinese banks were allowed into the
business in 1999 as the policy loosened.
The new rules classify borrowers as individuals, auto dealers
and institutional borrowers, and provide detailed qualification
requirements. They also specify minimum down payment requirements
for personal, commercial and used vehicles: 20, 30 and 50 percent,
respectively.
Many Chinese banks have set low or even zero down payments for
auto loans in recent years as they aggressively explored the new
area of consumer credit. They were caught off guard when defaults
began to rise.
Many lenders have recently tightened risk controls, raising down
payment requirements or even suspending the business in some
areas.
(China Daily August 18, 2004)