Draft Version of Online Lending Law Proposes One Year, 300,000 Yuan Limits on Credit for Individuals

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The draft version of China’s “Commercial Bank Internet Loan Provisional Regulatory Measures” (商业银行互联网贷款管理暂行办法) outlines tight restrictions on the extension of credit by conventional lenders via online channels.

Chinese regulators are currently soliciting a second-round of opinions on the draft law from a small set of respondents according to domestic media reports.

The draft law stipulates that “commercial banks cannot accept direct or covert risk ‘pocketing’ guarantees from cooperative entities” – a reference to organisations making payments from their own funds for credit products that go awry.

The draft further stipulates that the credit quota for individual online borrowers cannot exceed 300,000 yuan, and that the maximum term for online loans is one year.

“The online development of lending is an inevitable trend of Internet growth, and over the past two years many banking sector organisations have undertake online loan trials, while many have adopted methods for cooperation with loan-assistance organisations,” said Yu Baicheng (于百程), head of the 01Caijing Research Institute to Huaxia Times.

“During the process of the development of online lending different banks will vary immensely in their capabilities, and loan-assistance organisations will also be highly varied…product compliance issues and risk will occasionally arise.”

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