Mumbai: The China Banking Regulatory Commission (CBRC) has issued new rules that allow commercial banks to invest in lease finance companies. The new rules, effective March 1, are aimed at ensuring level-playing field for domestic and foreign players.

The new rule allows China-registered lenders, leasing companies and large manufacturers to hold shares in lease finance companies. The previous regulation on the management of lease finance companies, promulgated in 2000, had barred commercial banks from investing in these companies.

The revised guidelines also set the minimum registered capital fund of a financial leasing company at 100 million yuan against 500 million yuan earlier and minimum capital adequacy ratio at eight per cent.

The Chinese government move will facilitate integrated operations of financial business, which is seen as a departure from previous policy. The Chinese government had ordered all commercial banks to withdraw investment from financial leasing companies in 1997 in a bid to streamline and separate various types of financial businesses for better supervision.

The new rules would help provide enterprises with access to equipment when they are short of capital. Lease financing would help companies use bank loans to buy and use equipment required for an agreed period in return for paying a rental.