Mumbai:
The China Banking Regulatory Commission (CBRC) has issued
new rules that allow commercial banks to invest in lease
finance companies. The new rules, effective March 1, are
aimed at ensuring level-playing field for domestic and
foreign players.
The
new rule allows China-registered lenders, leasing companies
and large manufacturers to hold shares in lease finance
companies. The previous regulation on the management of
lease finance companies, promulgated in 2000, had barred
commercial banks from investing in these companies.
The
revised guidelines also set the minimum registered capital
fund of a financial leasing company at 100 million yuan
against 500 million yuan earlier and minimum capital adequacy
ratio at eight per cent.
The
Chinese government move will facilitate integrated operations
of financial business, which is seen as a departure from
previous policy. The Chinese government had ordered all
commercial banks to withdraw investment from financial
leasing companies in 1997 in a bid to streamline and separate
various types of financial businesses for better supervision.
The
new rules would help provide enterprises with access to
equipment
when they are short of capital. Lease financing would
help companies use bank loans to buy and use equipment
required for an agreed period in return for paying a rental.
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