(Yicai Global) Nov. 17 -- China's top economic planner the Monetary Policy Committee, part of the country's central bank, the People's Bank of China (PBOC), will require all business related to financial transactions and services to obtain licenses while regulations are imminent for the payday loan sector, The Beijing News cited committee member, Huang Yiping, as saying today.
Cash loans or payday loans, meaning small cash loan business are a convenient and flexible means of borrowing and repayment, and feature real-time approval as well as fast transaction speeds. However, high-interest rates associated with such loans have aroused social concern.
Statistics from 78 relatively well-known cash loan platforms in the current market show that the average interest rate is 158 percent while the highest interest rate can be up to 598 percent.
Cash loans should be supervised as soon as possible, especially with regards to risks control and examination of a borrower's credentials, he said. "We should promote the sharing of cash loan information as soon as possible, guard against the outbreak of credit risk caused by long loans," he added.
So-called long loans refer to one borrower with multiple loans from several lending institutions.
It is certain that payday loan needs to be included in the regulation, Huang. However, PBOC is still faced with a tough situation because it is not clear which institution controls cash loans and it is also questionable whether there are sufficient regulatory resources to manage the sector.
In the current stage of opening up and diversifying of financial markets, relevant regulatory departments resources need to be greatly increased, at least in order to ensure that regulation can keep pace with the market, Huang said.
Although cash loan has yet to be supervised, Huang Yiping argues that it will not take long to subject the business to supervision. Some local regulators have begun to take steps to rectify and even close cash-lending agencies, indicating that the risks have already arisen. It is believed that national measures will soon be introduced.