Major irregularities in bank loans in China: Auditors

Major irregularities in bank loans in China: Auditors Beijing: State-owned Chinese banks granted loans worth USD 4.6 billion without proper procedures or necessary guarantees, auditors said Thursday, amid fears of a banking crisis due to bad debts.

In a report presented to the Standing Committee of the National People's Congress (NPC), the National Audit Office (NAO) also revealed widespread fraud in allotment of low-income housing units.

The auditors said irregularities were found in loans extended by 27 branches of state-owned financial institutions amounting to a combined total of 28.44 billion yuan (USD 4.6 billion) for various projects.

Nine branches charged extra fees totalling 421 million yuan for small business loans and export credit services, auditor general of NAO, Liu Jiayi, said in a report presented to the country's top legislature.

The news came as the banks faced a liquidity crisis amid fears of a crash over bad loans, state-run news agency Xinhua reported.

After initial reluctance, China's central bank, the People's Bank of China agreed to provide liquidity support to cash-strapped banks to avert the crisis.

The report added that 22.03 billion yuan in embezzled loans has been retrieved and 693 people prosecuted for their involvement in the same.

Meanwhile, the Chinese auditors have also found that nearly 5.8 billion yuan meant for low-incoming housing projects were embezzled last year.

While the goal of the project was reached with government recovering funds through loans and issuances of enterprise bonds, the project fund management and distribution in some areas failed to meet standards, Jiayi told the NPC.

About 18,300 housing units which were sold by construction companies violated regulations, he added.

Nearly 120,000 households who were allotted housing units were found to be unqualified to do so, either because their income exceeded the standard or because they took advantage of loopholes to secure multiple low-income housing units, Xinhua quoted him as saying.

Since the audit, 1.27 billion yuan have been recovered and 18,900 ineligible households removed from the list.

China has vowed to build 36 million affordable housing units during the 2011-2015 period to meet the demand from low-income families.

PTI