Refinancing Loans Are Not Tool For Debt Evasion, Regulator Says
A policy that allows small businesses to renew a working capital loan without first repaying the original loan is not a tool for them to dodge their debt obligations, a financial regulator clarified on Friday, responding to concerns that companies are abusing the policy.
The China Banking Regulatory Commission — since merged into the China Banking and Insurance Regulatory Commission (CBIRC) — introduced the policy (link in Chinese) in 2014, targeting micro and small enterprises that face temporary funding problems.
Refinancing loans have been the subject of misunderstanding, CBIRC spokesperson Xiao Yuanqi told a news briefing (link in Chinese). The reality is that they don’t allow a company to avoid repaying its debts, but rather give banks time to review a new loan application before old debt is repaid, he said.
The regulatory response comes at a time when concerns are growing that banks and companies are abusing the refinancing policy, taking advantage of calls by policymakers for lenders to boost credit to small companies amid slowing domestic growth and escalating trade tensions with the U.S.
“For example, if a loan is due in September, and the company still wants to take out a new loan, we require the bank to start reviewing the loan application in April or May instead of August or September,” Xiao said.
If the company meets the bank’s conditions, it can secure a new loan immediately after the original loan is due, so that there is no time gap in between, he said.
Removing the gap has been a big help for small companies, Xiao said. Before the policy was introduced, firms had to wait from one to several months to get new credit after repaying their old debt, forcing them to take out bridging loans from sources such as microlending firms and peer-to-peer lending platforms that charged far higher interest rates than banks.
Contact reporter Lin Jinbing (email@example.com)
Nov 19 17:23
Nov 19 16:25
Nov 19 15:34
Nov 19 15:00
Nov 19 14:44
Nov 19 13:42
Nov 19 10:49
Nov 19 02:18
Nov 18 18:34
Nov 18 18:06
Nov 18 15:37
Nov 18 14:03
Nov 18 14:12
- 1Two Persons Diagnosed With Pneumonic Plague in Beijing
- 2In Depth: Southeast Asia Becomes Region’s Next Tech Battleground
- 3U.S. to Extend Huawei Reprieve by Allowing It to Continue Trade With U.S. Clients: Report
- 4Beijing Plague Patients Were Medical Transfers, Further Cases in Capital Unlikely: Officials
- 5Top Bank Regulators Move to Defuse Jitters After Two Bank Runs
- 1Power To The People: Pintec Serves A Booming Consumer Class
- 2Largest hotel group in Europe accepts UnionPay
- 3UnionPay mobile QuickPass debuts in Hong Kong
- 4UnionPay International launches premium catering privilege U Dining Collection
- 5UnionPay International’s U Plan has covered over 1600 stores overseas