Bank of Communications Co

Several banks recently announced caps on the overall financing costs of personal loans. State-owned large banks, joint-stock banks, city commercial banks, and rural commercial banks show an overall stepwise increase but with internal divergence. Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank all have an annualized rate cap of 6% for personal consumer loans and business loans, while Postal Savings Bank of China and Bank of Communications set the cap at 12%. Among joint-stock banks, China Merchants Bank, China CITIC Bank, and several others cap their self-operated consumer loans at 12%, Ping An Bank reaches 18.5%, and China Bohai Bank and Evergrowing Bank go up to 24%. For business loans, China Everbright Bank caps at 8%, Huaxia Bank at 10%, Ping An Bank at 20%, and China Bohai Bank at four times the loan prime rate. Among city commercial banks, Qilu Bank, Bank of Jilin, and Qishang Bank set the overall financing cost cap at 18%, while Bank of Chengdu caps self-operated consumer loans and business loans at just 7%. Rural commercial banks show clear divergence: Chongqing Rural Commercial Bank, Shunde Rural Commercial Bank, and Guangzhou Rural Commercial Bank cap consumer loans at 12%, Xiamen Rural Commercial Bank and Zijin Bank go as high as 24%, and Chongqing Rural Commercial Bank also sets a 10% cap for loans to farmers. The cap for cooperative internet loans is generally 24%. These caps take effect from August 1, 2026, and all represent the rate ceiling under normal repayment conditions. Su Xiaorui, senior researcher at Suxi Zhiyan, said that the rate caps correspond to different bank customer segments, and transparent disclosure with tiered stratification is an important sign of a maturing credit market.

Defaults on personal loans in China have surged to a record high. According to research firm Gavekal Dragonomics, household non-performing loan balances rose by more than 20 percent last year to a record 2.22 trillion yuan. That is equivalent to about 1.6 percent of GDP, meaning one in ten adults is behind on debt payments. All five major state-owned banks saw their personal loan NPL ratios rise last year, with Bank of Communications up 0.5 percentage points to 1.58 percent. China Merchants Bank's first-quarter personal loan NPL ratio rose 0.13 percentage points year-on-year to 1.14 percent, while its credit card delinquency rate climbed 0.15 percentage points to 1.90 percent. Analysts believe actual bad debts are higher than reported figures.