BANKS have offered relief on 3.9 trillion yuan (US$551 billion) of loans since the outbreak of the coronavirus pandemic to help struggling small businesses and bolster the economy.

Lenders have postponed taking principal repayments on 1.44 trillion yuan in loans to almost 800,000 small businesses and pushed back 65.4 billion yuan in interest payments as of May 31, according to a China Banking and Insurance Regulatory Commission (CBIRC) official. Banks also rolled over 2.4 trillion yuan in financing to small businesses.

Authorities are now pushing the financial industry to sacrifice 1.5 trillion yuan in profit this year by offering lower lending rates, cutting fees, deferring loan repayments and granting more unsecured loans to small businesses.

As part of the forbearance polices, banks have been granting payment delays on loans maturing after Jan. 25 and regulators recently extended the deadline on the preferential policy to March 31 next year.

Still, under current accounting rules, banks can book the interest income when they were due even though the actual repayments were delayed, the CBIRC official said, adding that such risks haven’t been reflected in banks’ profits and there will be a lag in the risk exposure until later this year or next year.

Chinese banks reported a 5.6 percent increase in profit in the first quarter as an expansion in loans and bond investments boosted interest income while payments holidays curbed bad loan recognition. By comparison, the economy contracted 6.8 percent.

Governor of China’s central bank Yi Gang said that the People’s Bank of China will keep financial liquidity at a reasonable and adequate level in the second half of this year.

The country’s new yuan-denominated loans are expected to reach nearly 20 trillion yuan this year, marking a 19-percent expansion year on year, while the total amount of social financing is poised to rise 17.28 percent to over 30 trillion yuan.

(SD-Agencies)