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China tells $151-bn unqualified micro-lending sector to stop 'cash loans'

Shares of US-listed Chinese online finance firms fell this week following the government crackdown

Reuters  |  Beijing 

China, investments, SASAC

The National Internet Association of issued a risk warning letter late on Friday telling "unqualified institutions" to immediately stop offering as steps up a crackdown on the micro-loan sector to fend off financial risks.

The 1 trillion yuan ($151.5 billion) short-term, unsecured lending sector, known as "cash loan" in China, has been accused of charging exorbitant interest rates and violent debt collection practices.

In Friday's warning letter, the Internet Association, a government-backed industry group, said the unqualified microlenders are disrupting economic and social orders and must stop lending immediately.

"Some institutions are not qualified to issue but have used false promotion to attract clients, conduct violent debt collection, and charge extremely high interest rates and fees, causing financial risks and social problems in some regions," it said in the letter released on its website.

Qualified lending institutions should also increase self-discipline, charge interest rates at a reasonable level, and increase information disclosure, the association added.

The companies are not allowed to conduct violent debt collection or harass unrelated people, it said.

has started to take steps to rein in the loosely regulated lending market.

On Tuesday, a top-level multi-ministry body, tasked by the central government to oversee the internet sector, issued an urgent notice to restrict granting of new approvals for micro-loan firms, Reuters reported on Wednesday.

Shares of US-listed Chinese online firms fell this week following the government crackdown.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Sat, November 25 2017. 11:05 IST