(Yicai Global) Jan. 3 -- Chinese oversight agencies have issued new regulations to rectify small online loans, precipitating a steep drop in the number of lenders in just the past month, and sending the rate of overdue payments surging with some online platforms.
The turnover of China's online small loans was CNY225 billion (USD34.6 billion) in December, a drop of 1.3 percent per month, while the number of lenders slipped 8.5 percent, statistical data show. Some platforms suspended new loans during the rectification, resulting in cash flow issues and raising default rates, as Economic Information Daily reported.
The past average overdue rate has risen to 40 percent, up from an earlier 20 percent, but some arrears have even skyrocketed to 60 percent with small platforms, an online lending staffer indicated. The rate of overdue online loan recovery is also falling, to a current 45 to 50 percent, down from a previous 70 percent.
Chinese regulators promulgated new online lending rectification regulations on Dec. 1, to focus on issues and potential risks in the sector, including usury, improper collection of overdue debts, high leverage and proliferation of risks. Online lending platforms are now required to stiffen their supervision and control over their capital sources.