China tightens rules on $1.3 trln credit card business

SHANGHAI (Reuters) - China unveiled tighter rules late on Thursday to better regulate its $1.3 trillion credit card industry, urging lenders to adopt a "prudent" growth strategy, and monitor risks more closely.

Banks are also barred from using the number of cards issued or market share as main performance metrics, and are required to cap the number of dormant cards at 20% of total, according to rules jointly published by China's central bank, and the country's banking regulator.

"China's credit card business has been growing rapidly, playing a key role in facilitating payment and consumption," the China Banking and Insurance Regulatory Commission (CBIRC) said in a statement on its website accompanying the release of the new rules.

"Recently, however, some banks ... are lax in risk management, and have behaved in ways that hurt customers' interest," the regulator said.

Chinese banks have issued a total of 800 million credit cards as of the end of 2021, with outstanding loans totalling 8.62 trillion yuan ($1.29 trillion), according to the People's Bank of China. Roughly 86 billion yuan of credit card loans, or 1% of total outstanding, are overdue for six months or longer.

The new rules require banks to tighten scrutiny over credit card loans, and strengthen risk management control.

Banks must also set up a sound system to monitor, identify, alert and prevent abuse in the credit card business, according to the rules.

($1 = 6.7005 Chinese yuan renminbi)

(Reporting by Samuel Shen and Brenda Goh; Editing by Shri Navaratnam)