CHINA’S banking and insurance regulator said yesterday that bad loans at banks now stand at a high level due to the impact of the coronavirus pandemic.

“Asset quality at smaller banks will also be under pressure this year, and credit risks in some institutions will continue to accumulate,” according to a statement by the China Banking and Insurance Regulatory Commission (CBIRC).

Domestic lenders recorded rising soured debt and shrinking net interest margins, a gauge of banks’ profitability, amid the economic impact from a prolonged pandemic.

Small firms have been allowed to delay loan and interest repayments to help them weather the dislocation in the economy caused by the lockdown ordered while bringing China’s epidemic under control.

The country’s largest lenders posted stable first-quarter results despite the impact of the virus. But smaller lenders, who have less capital reserves and lend less to well-financed State borrowers, would be more vulnerable to the resulting economic slowdown.

The nonperforming loan (NPLs) ratio of country’s 134 city commercial banks stood at 2.49 percent by the end of March, while that of thousands of rural banking institutions was at 4.9 percent, the CBIRC said yesterday.

That was higher than the industry-wide average NPL ratio of 2.04 percent by the end of first quarter.

(SD-Agencies)