(Yicai Global) Jan. 21 -- Chinese commercial banks wrote off nearly CNY1 trillion (USD147.2 billion) in loans last year, over 30 percent more than 2017, per the latest data from the China Banking and Insurance Regulatory Commission.

The country's banks have raised their limits for the amount of loans that can be cancelled, heartened by regulators and the sector, which turned a profit overall last year, a survey by Shanghai Securities News shows. 

Some applied to the authorities to set their limits higher last year, e.g. Industrial Bank asked to lift its to CNY29.8 billion (USD4.4 billion) from CNY28 billion, while Bank of Changsha sought to raise its ceiling to CNY600 million from CNY400 million (USD59 million) in the second half.

Financial institutions eased curbs on discharging bad loans based on standards China's Ministry of Finance issued in 2017 and thus more loans were discharged as jettisoning bad debts more favorable.

Banks now not only ensure their non-performing loan ratio is acceptable to the regulator, but also extend more credit to small, micro and private firms by striking bad debts.

Bad debts are disposed of in two ways, according to asset management companies in South China's Guangdong province. 

The first is with retention of creditor's rights, with the debts handed over to law firms in batches for collection, while the statute of limitations is regularly extended to preserve the legal force of these claims. The other is for the creditors to relinquish their rights and transfer bundles of bad loans at a 90 percent discount to third parties for collection.

Because the legal relationship is extremely clear, banks usually prevail in court, but such cases are time-consuming because of the difficulty of execution, insiders told Yicai Global, but enforcement of court awards is becoming less difficult, aided by improvements such as online monitoring systems and lists of those against whom judgments have issued for breach of their obligations.

China's commercial banks had booked CNY2 billion in non-performing loans as of late last year and thus their bad loan ratio was 1.89 percent, and they cancelled CNY988 billion in NPLs last year, CNY259 billion or over 35 percent more than 2017, per data the CBIRC released on Jan. 11. 

About CNY1 trillion in unserviced debt was was written off last year, a rise of CNY256.5 billion or 33 percent more than the year before, per data China's central bank released on Jan. 15, which also confirmed the upward trend.

Editor: Ben Armour