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Business News/ Industry / Banking/  Coronavirus: China banks' bad loans may jump by up to $1.1 trln, says S&P Global
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Coronavirus: China banks' bad loans may jump by up to $1.1 trln, says S&P Global

Outbreak has so far killed 2,100 and infected more than 75,000
  • China's financial regulators have urged banks to lower interest rates and extend loans
  • A man wearing a mask is seen at Lujiazui financial district in Pudong, Shanghai, China. (Photo: Reuters).Premium
    A man wearing a mask is seen at Lujiazui financial district in Pudong, Shanghai, China. (Photo: Reuters).

    New Delhi: Banks in China may see a surge in their non-performing loans by as much as 7.7 trillion yuan ($1.1 trillion) in 2020 if the coronavirus outbreak doesn't peak until April, Reuters reported on Thursday, citing estimates by credit agency S&P Global.

    "As the coronavirus outbreak disrupts Chinese production, some companies and individuals will have difficulty with debt repayments," the report quoted S&P Global as saying.

    China has been struggling to contain the epidemic which has so far killed 2,100 and infected more than 75,000, triggering stringent curbs on travel and movement which in turn have kept many businesses shut, disrupting demand and supply of goods and services.

    In a bid to cushion the impact, China's financial regulators have urged banks to lower interest rates and extend loans to targeted companies that have been affected by the outbreak.

    Benchmark lending rates were cut on Thursday, as was widely expected. The one-year loan prime rate (LPR) was lowered by 10 basis points to 4.05% from 4.15% at the previous monthly fixing.

    The five-year LPR was lowered by 5 basis points to 4.75% from 4.80%.

    Local authorities have been compiling a list of firms to help the People's Bank of China (PBOC) funnel 300 billion yuan worth of cheap loans to virus-hit companies nationwide.

    The LPR is a lending reference rate set monthly by 18 banks. The PBOC revamped the mechanism to price LPR in August 2019, loosely pegging it to the medium-term lending facility rate.

    "We expect China will loosen NPL recognition standards to help affected businesses and communities, and that it may take years to digest the forbearance," the S&P report added.

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    Published: 20 Feb 2020, 03:31 PM IST
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