CHINA plans to allow some commercial banks to start selling soured personal loans to distressed asset managers as soon as this month, according to sources familiar with the matter.

At a December meeting by the official credit assets transfer center, banks and State-run bad loan managers were asked to accelerate preparations to ensure a smooth start of the trial program in January, said the sources. Industrial & Commercial Bank of China Ltd. could be the first seller, other sources said.

Details of the trial are not yet finalized and still subject to approval by the China Banking and Insurance Regulatory Commission, said the sources.

The move will beef up financial strength at Chinese banks by helping them offload nonperforming personal loans, according to research firm Financial Regulation & Law.

“The policy will benefit retail banks particularly,” said Liao Zhiming, chief bank analyst at China Merchants Securities Co. “It offers a market-oriented option for banks to get rid of the risks and trim their size of bad loans.”

The new pilot program includes six of China’s biggest State-owned commercial banks and 12 joint stock lenders, as well as the largest distress asset managers and some regional bad debt management firms, people familiar with the matter said last year.

China’s US$45 trillion banking industry suffered its worst profit slump in more than a decade last year after being put on the front line in helping millions of struggling businesses hurt by the COVID-19 pandemic.

With the virus now contained in China and the economy staging a rebound, lenders are being allowed to shift to more prudent loan growth and risk management. (SD-Agencies)