New rules define auto loans more specifically

The People's Bank of China and China Banking Regulatory Commission jointly issued regulations on auto consumption loans management on August 17. Compared with the version of 1998, the new rules extends the business to more lenders, classifies borrowers more carefully, specifies different packages of loans and intensifies the risk management of auto loans. The rules take effect as of October 1 this year.

Lenders are no longer confined in solely state-owned commercial banks. All commercial banks, urban and rural credit cooperatives and non-banking financial institutions approved to deal with auto loans business are eligible to offer the service.

For auto loans under any category, the term of the loan (extension included) should not exceed five years. Specifically, loans for second hand autos should be repaid within three years and loans to dealers should be paid back within a year.

It is stipulated that the maximum amount of grants to private autos, commercial autos and second hand motors is 80 percent, 70 percent and 50 percent respectively of the total purchasing payment of automobiles under the loans.

According to the regulations of auto finance firms released by CBRC in October 2003, these firms are not allowed to set up branches nationwide. This makes it impossible for them to receive auto loans applications directly. Given this, the newly issued rules of auto loans management state clearly that lenders should handle or entrust their designated dealers to handle auto loans application.

By People's Daily Online