China's largest state-owned commercial banks have started clamping down on auto lending in the face of rising loan defaults in a country where car ownership is soaring, state press reported yesterday.
China's big four lenders and others have increased loan down-payment requirements to as much as 50 percent of the total amount and shortened loan terms to three years from five, the China Daily said.
Some have even introduced stricter guarantee requirements, securing the loan against collateral other than the car itself.
"The credibility of many borrowers was just terrible and the lack of an effective credit system has left us vulnerable," a senior auto loan manager at one of the four major commercial banks was quoted as saying.
"We simply had to raise the threshold," he said.
For example, the Bank of China has seen roughly a 2 percent default rate on car loans this year, higher than in other consumer loan categories, the newspaper said.
Chinese banks began granting consumer loans only a few years ago as part of government efforts to promote spending on big-ticket items such as cars.
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