(Yicai Global) March 2 -- Two Chinese asset management companies have become the first in the country to buy packages of personal bad loans from banks as regulators start to encourage lenders to offload their non-performing loans at substantial discounts.

Goho Financial Asset Management and GIG Asset Management won the bidding with a combined offer of CNY9.99 million (USD1.5 million) for CNY54.9 million (USD8.5 million) of unpaid personal loans, people familiar with the matter told Yicai Global.

It was the first such auction since the China Banking and Insurance Regulatory Commission began to pilot the bulk transfer of personal NPLs in January to accelerate the disposal of bad assets. China’s commercial banks had CNY3.5 trillion (USD540.8 billion) of NPLs at the end of last year, with a ratio of 1.92 percent to the total amount of outstanding loans.

Altogether, the two AMCs bought four bundles and paid an average of 32 percent of the loan principal, which came to CNY30.4 million. While it will be difficult for them to recover the entire outstanding amount, they will be hoping to recoup enough to cover their outlay and even make a profit.

Whether the NPL assets were overvalued at the auction is not yet clear, Gan Xiaohu, secretary general at Zhejiang Investment Finance Association's Special Committee for the Disposal of Non-Performing Personal Loans, told Yicai Global. In general, only between 10 percent and 30 percent of overdue credit card loans can be recovered by lenders.

Hefei-based Goho Financial bought a package from the Industrial and Commercial Bank of China for a quarter of the principal and 13 percent of the interest, according to the Center for Registration and Circulation of the Banking Industry’s Credit Assets where the auction was held.

GIG Asset Management, which is headquartered in Guangxi Zhuang Autonomous Region, purchased a bundle from Ping An Bank at 32 percent of the principal and two bundles from ICBC at 50 percent.

Editors: Tang Shihua, Kim Taylor