The recently emerging personal credit loans are gaining momentum. Following the launch by the Shanghai branch of the Construction Bank, the personal credit loan product from the Shanghai branch of the Industrial and Commercial Bank of China (ICBC) has also been newly introduced. This was reported yesterday by the "Everyday Economic News" from ICBC.
According to ICBC officials, the maximum credit limit for personal credit loans from the Shanghai branch of ICBC is 500,000 RMB, with a loan term up to 3 years, requiring no collateral or guarantees. Customers only need to provide relevant employment and income proof to the bank. The interest rate follows the standard consumer loan rate, with premium customers potentially receiving a slight discount. Currently, the personal consumer loan rates are: less than 6 months, 5.22%; 6 months ≤ term < 1 year, 5.58%; 1 year ≤ term < 3 years, 5.76%; term of 3 years, 5.85%.
The introduction of ICBC's credit loans in Shanghai is not unrelated to the sluggishness of personal loans seen in the second half of last year. In the fourth quarter 2005 Monetary Policy Implementation Report, the People's Bank of China stated that by the end of 2005, the balance of personal consumer loans was 2.2 trillion RMB, increasing by 10.4% year-on-year, a decrease of 16 percentage points compared to the previous year. The situation of personal consumer loans from Shanghai-based Chinese financial institutions is similarly not optimistic. A February report on the operation of Shanghai’s monetary credit showed that the balance of personal consumer loans at the end of February was 274.813 billion RMB, decreasing by 4.024 billion RMB from the previous month, among which personal housing loans and car consumption loans decreased by 3.6 billion RMB and 230 million RMB respectively.
At the same time, from July last year to the end of the year, personal home loans from Chinese banks in Shanghai have continuously declined for 6 months. From July to December last year, they cumulatively decreased by 11.7 billion RMB, and by the end of January this year, personal loans mainly consisting of mortgages fell by another 2.539 billion RMB at the start of the year.
Industry analysts said that under the unfavorable circumstances of personal loan growth, introducing credit loans is a rational move to expand credit business and alleviate the persistently high deposit-loan spread. However, there are currently two major shortcomings in the design of this product: first, current credit loans can only be applied for at the bank when the customer needs money, which still does not qualify as a credit line; second, current credit loans primarily target high-end customers, but the number of such customers is limited, and they may not necessarily require loans. Is there a suspicion that these credit loans are merely for show?
Some industry insiders also proposed that once the threshold for personal credit lines is lowered, it will overlap with current credit cards, and the interest rate would be more attractive than the 18% credit card rate. Therefore, after credit loans enter the market, will they impact the survival and development of credit cards? Moreover, credit card cash advances not only accrue interest from the day of withdrawal but also incur a 3% handling fee. Promoting personal credit lines is a significant trend for banks developing credit loans. With credit lines, banks can proactively seek more target customers, allowing them to “get one-time credit, use as needed.” Thus, the rules for credit loans still need further improvement.
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