(Yicai) Jan. 20 -- China's financial authorities have released a circular to extend the validity and adjust the scope and standards of the policy to subsidize interest rates on consumer loans to promote consumption.

The one-year policy, which took effect last September, will be extended to the end of this year from the initial end of August, according to a circular jointly released today by the Ministry of Finance, the People's Bank of China, and the National Financial Regulatory Administration.

Consumers can be eligible for a 1 percentage point interest rate rebate on qualifying personal loans for cars, medical and elderly care, education, tourism, electronics, and home furnishing, according to the policy. If a loan's interest rate is below 2 percent, the subsidy is capped at half that rate.

There were three main adjustments to the policy this time. First, it expanded its scope to cover all types of consumption, compared with only seven key consumption categories under the original policy, and added credit card bill installments to the eligible scope—provided that the authorized financial institutions offering such loans and installments can verify their authenticity and compliance.

The second adjustment was to cancel the maximum subsidy limit of CNY500 (USD72) per transaction and that of CNY1,000 (USD145) per borrower per single authorized lending institution. However, the policy will keep the CNY3,000 cap for how much an individual can borrow from the same lender in a year.

Finally, the number of authorized institutions able to provide consumer loans with subsidized interest rates was expanded from 21 nationwide banks to other institutions, including city commercial banks, rural cooperative financial institutions, foreign banks, and consumer finance and auto finance companies with a regulatory rating of 3A or above.

The implementation of the interest rate subsidy policy for personal consumer loans supports residents' consumption with real monetary incentives, reduces their consumer credit costs, and stimulates their consumption potential, ultimately helping support the expansion of domestic demand, a senior official from the finance ministry said.

The policy has already played a role in stimulating consumption. As of Nov. 30, Industrial and Commercial Bank of China had signed consumer loan interest rate subsidy agreements with nearly 1.6 million customers, Securities Times reported earlier this year, citing data from the bank.

Moreover, China Construction Bank had inked nearly 1.3 million such agreements in the first two months of the policy implementation, with the total outstanding loan balance of CNY37.9 billion (USD5.5 billion) more than a year earlier, the data also showed.

Editors: Tang Shihua, Futura Costaglione