Chinese regulators issued new rules to suspend license issuance to online microlenders and clean up existing business.
Unlicensed organizations and individuals have been banned from commercial lending operations, and regulators should stop approving new licenses to online microlending companies, Caixin reported, citing new rules jointly issued Dec. 1 by the People's Bank of China and the China Banking Regulatory Commission.
Authorities will also suspend approvals for microlenders that have obtained licenses to commence operations.
Microlenders should issue loans for specific purposes, the authorities said, and are barred from lending for speculation in the stock and futures markets, or to fund existing loans with new loans. Credit asset transfers and asset-backed securities should also be recorded as financing on the balance sheets of microlenders, which will not be allowed to sell or transfer credit assets through online platforms.
Further, lending institutions are barred from lending online to students and borrowers who do not have the ability to pay back. Loans cannot be used as downpayments or over-the-counter payments in the property market.
The rules add that banking institutions are not to fund unlicensed lenders, with banks barred from outsourcing credit vetting and risk-control operations when cooperating with third-party lenders. The authorities also asked banking institutions to ensure third-party lenders do not charge borrowers interest.
Further, peer-to-peer lending intermediaries should not broker bank agreements over online P2P lending, with such lenders barred from charging interest and fees from loan principles, or setting high overdue interest payments.
Institutions found violating the rules may have their licenses revoked, the authorities warned, noting that while the rapid development of online microlending has catered to consumption demand, it could also attract financial and social risks.
On Nov. 21, the PBOC urged provincial governments to suspend regulatory approval for new online microlenders. Three days later, the government-backed National Internet Finance Association of China said that unqualified microlenders should suspend lending immediately.
