THE amount of nonperforming loans (NPLs) at China’s commercial banks rose to 2.16 trillion yuan (US$317.66 billion) at the end of March, the highest since the end of 2003, official data showed Friday, as China steps up efforts to curb financial risks.

While NPLs rose 95.7 billion yuan from the start of the year, the industry-wide NPL ratio declined slightly to 1.8 percent at the end of the first quarter, compared with 1.89 percent at the end of 2018, Liu Zhiqing, deputy head of the statistics department at the China Banking and Insurance Regulatory Commission (CBIRC), told reporters.

The dip in the NPL ratio likely stemmed from record bank lending in the quarter.

The bad loan data comes at a time Chinese authorities have been pushing banks to sharply hike their lending to small and mid-sized businesses, to help combat a slowdown in economic growth.

New draft rules released last month require lenders to recognize not only bad loans but also defaulted bonds, souring interbank assets and off-balance sheet businesses as nonperforming assets, and that the lenders should set aside more capital as a buffer.

The draft rules also require banks to classify loans that are more than 90 days overdue as NPLs, even if those loans are backed by collateral.

Liu, commenting on the draft rules, said they would have “limited impact” on banks’ asset quality, and would not trigger a spike in nonperforming assets.

He said the regulator would encourage banks capable of doing so of classifying loans more than 60 days overdue as NPLs, but that was not compulsory.

Chinese banks disposed of 368.9 billion yuan in bad loans over the first quarter, an increase of 30.9 billion yuan compared with a year earlier, Liu said.

(SD-Agencies)