The value of nonperforming loans (NPL) in some Chinese lenders rose last month, although the country's pace of lending slowed following the raising of the reserve requirements that banks have to maintain.

The China Banking Regulatory Commission said yesterday that the value of nonperforming loans in some domestic commercial lenders increased in October, without giving more details.

It is the first time that the CBRC reported a rise in bad loans of some domestic banks following its formation in April.

"Banks should improve the quality of newly issued loans and not compete only in the areas of market share and temporary returns," said the CBRC in a statement.

"Relevant banks should pay enough attention to the situation," said the CBRC, the nation's banking industry watchdog.

National homegrown banks reported an average NPL ratio of 18.7 percent by the end of September with the big-four state-owned commercial banks carrying an average NPL ratio of 21.4 percent.

At the government's insistence, the big-four lenders have to cut their average NPL ratio to below 15 percent by the end of 2005. The domestic banking industry will be fully opened to overseas rivals by December 2006, according to China's commitment to WTO.

Chinese lenders have seen a huge increase in loans since the beginning of this year as more domestic residents applied for auto loans and used mortgages to buy houses amid the country's rapid economic development.

Domestic financial institutions extended loans worth 1.89 trillion yuan (US$228.26 billion) in the first seven months of this year, which is the latest figure available, compared with 1.85 trillion yuan in the whole of last year.

The People's Bank of China, the Chinese central bank, said recently that the lending pace of domestic lenders slowed in October.

The outstanding value of renminbi lending stood at 15.67 trillion yuan at the end of last month, a rise of 61.6 billion yuan from a month earlier. The increase was 10.6 billion yuan less than a year earlier, said the PBOC.

China has raised the reserve requirements to 7 percent from 6 percent for banks and other deposit-taking financial institutions from September.

The higher requirements will hopefully slow down the excessive growth of lending, said the PBOC.

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