(Yicai Global) March 15 -- Chinese lenders' non-performing loan ratios got better last year after regulators encouraged the banks to get rid of such loan defaults while big gaps remain between big and small banks.

Lenders in 20 provinces and municipalities reported lower NPL ratios last December from a year ago, branches of the China Securities Regulatory Commission recently said in statements. Only Tianjin, Chongqing, and Zhejiang province increased their ratios.

Since 2020, regulators have required banks to speed up NPL disposal. But pressures remain, especially for small and medium-sized lenders, due to loan extensions after the Covid-19 pandemic last year, an executive at a small-scale lender told Yicai Global.

The Few Gainers

Nationwide, Beijing had the lowest ratio at 0.55 percent, unchanged from December 2019. Meanwhile, Beijing lenders' NPL reductions rose by 80 percent from the average of the past two years.

Northeastern Tianjin's ratio was 3.04 percent, up from 2.29 percent. Southwest-central Chongqing logged 1.48 percent, rising from 1.12 percent. Eastern Zhejiang province had a small increase to 0.98 percent from 0.91 percent.

The Big and the Small

The banking industry as a whole is relatively stable, but small and medium-sized banks lack the means to resolve these problems as their pressures are larger than those of joint-stock banks and large state-owned lenders, an industry analyst told Yicai Global.

Small lenders need to expand their channels to decrease their NPLs to resolve their financial risks, according to industry insiders. Market access for the disposal of non-performing assets needs to be relaxed, suggested Wang Tianyu, chairman of Bank of Zhengzhou. Moreover, China needs to promote such assets' securitization, accelerate value realization, as well as extend pilot programs to these struggling institutions while giving them more autonomy in processing bad loans, he added.

Small-scale lenders may have fallen through the cracks. Gansu province's financial institutions lowered their NPL ratios to 6.74 percent from 7.86 percent. But big banks may have done most of the work. Joint-stock banks reported a ratio of 2.6 percent, city commercial banks 2 percent, and large commercial banks 1.82 percent. In the absence of specific data on rural lenders, the province's average suggests that their ratios were much higher than 6.74 percent.

Moreover, documents from more than 10 small and medium-sized banks in Hunan and Guangdong provinces show that their NPL ratios exceed 7 percent.

Editor: Emmi Laine, Xiao Yi