Apr 02, 2019 (China Knowledge) - The Agricultural Bank of China, one of the country’s largest state-owned commercial lenders has reported a much higher non-performing loan (NPL) ratio for its loans to private companies compared to other segments.

Last year, the Agricultural Bank’s NPL ratio for loans to the private sector stood at 6.37%, 4 percentage points higher than the average for the entire corporate sector and also higher than that of the bank’s overall NPL ratio of 1.59%.

The high NPL ratio in the private sector highlights the deadlock banks face between managing the government’s demand to extend more lending to the private sector and managing the quality of their assets.

China’s largest state-owned lenders have historically favored providing loans to the country’s state-owned enterprises over private companies. In recent times, these banks have come under increasing pressure to extend more credit to the private sector to shore up the country’s slowing economy which has sparked concerns that this could result in a deterioration of the bank’s assets.

Last year, the Agricultural Bank’s loans to private companies stood at RMB 1.67 trillion with the bank providing loans to more than 67,000 companies in the private sector, up 60% from a year before.

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