China's Banking Regulator to Monitor New Loans on Monthly Basis

BEIJING, Jan. 21 -- The China Banking Regulatory Commission (CBRC) has revived the "loan quota" mechanism and will scrutinize commercial banks' lending pace on a monthly and quarterly basis, according to sources familiar with the matter.

"Each commercial lender should, each month, advance no more than 12 percent of the total new credit it planned to give out in the year," the source told China Daily yesterday on condition of anonymity.

From a quarterly perspective, new loans being issued should not exceed 30 percent of the bank's annual loan target, the source said.

That means total new loans being extended every month will be capped at 900 billion yuan, the source said, but noted that the amount of credit in January might be "an exception", as commercial lenders tend to be front-loaded this month partly due to the upcoming weeklong Spring Festival holiday in February.

The loan quota is set by the central bank, while the CBRC is responsible for overseeing the lending pace of each commercial lender, the source said.

Analysts said the move is a fresh sign that the government is determined to soak up liquidity in the face of the possibility of rising inflation and asset bubbles.

The loan quota mechanism was imposed between late 2007 and the first half of 2008 as a measure to deal with the economic overheating, and was removed in late 2008 due to the global financial crisis.