(Yicai) Jan. 3 -- Chinese regulators will now allow banks to lend up to 90 percent of the funds for share buybacks and stake increases by listed companies and their major shareholders through the USD41 billion special relending facility unveiled last September, according to people familiar with the matter.

Following recent policy changes, eligible firms and their main investors only need use up to 10 percent of their own money on stock repurchases and equity holding increases, compared with 30 percent previously, the sources said, adding that they can also pledge other stocks as collateral, making it easier and cheaper to secure the loans.

Furthermore, banks can now set their own loan terms and collateral requirements, the sources said. The new policy also explicitly encourages issuing stock repurchase and buyback loans based on creditworthiness, without the need for collateral or guarantees.

In October, 21 financial institutions were selected to issue special loans through the relending facility at an annual interest rate of not more than 1.75 percent. The total amount set aside for relending was set at CNY300 billion (USD41 billion).

In excess of 700 firms and their shareholders had applied for the loans as of last month. More than 200 of them sought more than CNY50 billion (USD6.8 billion), with over 60 percent of that intended for share buybacks. The loans are based on preferential interest rates averaging about 2 percent.

Editor: Kim Taylor