Smaller Chinese lenders in rural areas are no longer allowed to make loans or conduct bill financing outside their home bases, as the regulator tries to improve liquidity for local farmers and small businesses.

The China Banking and Insurance Regulatory Commission said in a Dec. 26 release that it is tightening the operating rules for smaller banks in villages and townships, as some of them have "deviated from their primary purpose of financing growth of the rural communities."

The CBIRC also said those rural lenders must make sure not to lend too much to any single borrower to control asset quality risk, although it did not specify any recommended level.

As of end-September, China had 1,633 rural lenders, of which 65.7% are based in central and western China, according to the release. Outstanding loan per borrower was 335,000 yuan, it added.

As of Dec. 25, US$1 was equivalent to 6.99 Chinese yuan.