September 20, 2019 / 9:40 AM / 2 months ago

China urges banks to step up collateral-free loans to small firms

BEIJING, Sept 20 (Reuters) - China’s banks should increase loans to small firms secured by their credit records, instead of collateral, the state planner and banking and insurance regulator said on Friday, in a bid to boost lending support for the slowing economy.

The step aims to resolve financing difficulties and high funding costs faced by small firms, the National Development and Reform Commission (NDRC) and the China Banking and Insurance Regulatory Commission (CBIRC) said in a joint statement.

They encouraged financial institutions to offer more loans backed by firms’ credit history to help reduce banks’ dependence on collateral, they said, adding that such unsecured loans could be backed by water or tax bills paid by the companies.

They urged local governments to adopt preferential policies for such loans, and set up special funds to compensate for possible defaults, the statement added.

China’s central bank has cut banks’ reserve requirements seven times since early 2018 to spur lending, especially to small and private companies vital for growth and jobs. (Reporting by Cheng Leng, Kevin Yao in Beijing; Editing by Clarence Fernandez)

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