BEIJING, Dec 10 (Reuters): Industrial and Commercial Bank of China, the country's biggest bank, is boosting loans to small and medium enterprises (SMEs) despite higher risks from this type of lending, its chairman said today.
Like other Chinese banks, ICBC has traditionally lent to state-owned firms rather than smaller private firms, even though these now make up the majority of businesses in China.
"Lending to SMEs is a must for Chinese commercial banks because the market for traditional banking services is becoming smaller while there is great demand for loans from SMEs," Chairman Jiang Jianqing told a forum.
Between January and November, the bank had extended 162 billion yuan ($20 billion) in new loans to 26,000 Chinese SMEs, up a third from the start of the year, he said.
Lending to small firms accounted for 22 per cent of new lending in the first 11 months, he added.
ICBC is one of three big Chinese state banks given cash by the state to help clean up debt-ridden balance sheets as they look to sell shares to investors.
Much of the bad loans cleaned off their balance sheets had been extended to state firms for political reasons but the banks still see lending to private firms as more risky.
Despite efforts to improve credit risk controls, the bank has reported its bad loan ratio rose to 4.6 per cent in September from 4.5 per cent at the end of June.