Lenders Revisit Personal Loans Amid Regulatory Scrutiny and Rising Bad Loans

Commercial banks in several Chinese cities have launched retrospective reviews of retail loans issued since 2022 to identify misused funds and illegal broker activity, as default rates climb, according to people familiar with the matter.

The internal probes follow targeted on-site inspections by the National Financial Regulatory Administration (NFRA). Using big data to flag high-risk regions, regulators have already found cases of weak due diligence and consumer and business loans being diverted to unauthorized uses, the sources said.