(Yicai Global) Nov. 29 -- Chinese rural lenders are resorting to unconventional methods to lower their ratios of defaulted loans.
Central China's Chenzhou Rural Commercial Bank announced a peculiar report on their social media WeChat channel, showing their recent successes in making individuals and company owners repay their debts.
"Please bring your cutlery, shoes and all daily necessities!" said Zhou Songbai, the secretary of the bank's party committee at a meeting with over 140 staff members on Oct. 15. "I will go to the deadbeat's home and stay until the loan is settled." At this point, Zhou's team from the bank had already sat put at one debtor surnamed Hu's apartment and negotiated a repayment plan for more than three hours, without success.
The central government has tightened banking rules this year to reduce state-owned banks' freewheeling borrowing to commercial banks, and force lenders to expose their hidden liabilities, which has put pressure particularly on rural commercial banks. Lenders, such as Guiyang Rural Commercial Bank, Shandong Zouping Rural Commercial Bank, and Tongling Rural Commercial Bank have logged rapid increases in their non-performing loan ratios.
On the next day after the meeting, the participants took to the streets, wearing bright uniforms and signs with messages such as "Law Abides Debtors" and they collected cash from borrowers in two districts of the city. During that day, they had managed to garner a sum of CNY2.5 million (USD354,000).
Hu, who had borrowed CNY600,000 (USD86,500) from the bank to start a clothing business, had failed to pay back anything for about 18 months while the loan interest had grown to CNY110,000. After two and a half hours of negotiation, he agreed to sell his property to settle the loan by the end of the month.
During the next four days of work, the bank workers, who had slept at borrowers' houses, had accrued CNY142 million that contributed to almost 500 non-performing loans.
Another bank in Shuyang county in Jiangsu province used similar measures to urge a car company to repay its debt of CNY1.4 million which had defaulted in May last year, Yicai Global's sister publication Yicai reported yesterday. After the clerks showed up at the gates of the auto firm, they received CNY106,000 during the same day.
A rural commercial bank in Gaoping country in northern China's Shanxi province had a particularly persistent debtor surnamed Hou who refused to open the door to bank employees once they came to demand the CNY90,000 (USD13,000) that Hou had borrowed to buy a car. An account manager explained the consequences of ruining a personal credit score and Hou agreed to return the whole sum.
Some of the cases brought community members closer together. Once some bank workers came to seek what belongs to the lender at a small town in Jishui county in southeastern Jiangxi province, they found an individual in bad health amid tight financial conditions to support a family. The clerks designed a reasonable repayment plan and donated CNY2,000 (USD288) on top of that.
Another borrower said that the money had gone to planting oranges but as sales channels were scarce, profits were pending. The financial workers used their networks of people to help sell the fruit and got the farmer out of trouble.
Editor: Emmi Laine