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	NOTICE OF THE PEOPLE'S BANK OF CHINA ON SOME ISSUES CONCERNING RENMINBI LOAN INTEREST RATES

	(No. 251 [2003] of the People's Bank of China promulgated on December 10, 2003 and shall come into force as of January 1, 2004)


SUBJECT : LENDING; RENMINBI; INTEREST RATES
ISSUING DEPARTMENT : THE PEOPLE'S BANK OF CHINA
ISSUE DATE : 12/10/2003
IMPLEMENT DATE : 01/01/2004
LENGTH : 509 words
TEXT :

In order to steadily promote the market-oriented reform of interest rates, and bring into full play the regulating function of the interest rate leverage, we hereby give our notice as follows regarding the relevant matters concerning Renminbi loan interest rates, as well as the calculation and settlement of interest, etc.:

I. On the issue of calculation and settlement of Renminbi loan interest. The method for calculating and settling the interest of all items of Renminbi loans (excluding individual housing loans) shall be determined through negotiation between the borrower and the lender.

II. On the issue of adjustment of the loan interest rate within the contractual period. The original method of determining the interest rates for medium and long-term Renminbi loans once every year shall be changed into a method in which they are determined by the borrower and the lender pursuant to commercial principles with monthly, quarterly or yearly adjustments during the contractual period, or are determined in a way of fixed interest rate.

The interest rates for the loans of 5 years or longer shall be independently determined by the financial institutions by referring to the interest rates announced by the People's Bank for the loans of 5 years or longer.

III. On the issue of penalty interest rate. The current method of calculating the interest for overdue loans (i.e., the loans which the borrower has failed to return on the date stipulated in the contract) with the penalty interest rate at two point one ten-thousandth (0.021%) per day, shall be changed into a method in which an additional amount of 30%-50% is added on the basis of the loan interest rate stated in the loan contract; with respect to the penalty interest rate for the loans which are not used by the borrower for contractual purposes, the current method of calculating interest by five ten-thousandth (0.05%) per day, shall be changed into a method in which an additional amount of 50%-100% is added on the basis of the loan interest rate stated in the loan contract.

For overdue loans or the loans not used for contractual purposes, the interest shall be calculated at a penalty interest rate from expiry of the term of the loans or from the initial day when the loans were not used for contractual purposes, until the principal and interest have been paid off. Where there is any interest that cannot be paid on time, compound interest shall be calculated at a penalty interest rate.

IV. The present Notice may apply to the loans granted on or after January 1, 2004. An undue loan granted prior to January 1, 2004 shall still be under the implementation of the original loan contract, however, the present Notice may also apply on the condition that both the borrower and the lender have so agreed upon through negotiation.

V. The present Notice shall come into force on January 1, 2004. In case any relevant provisions on Renminbi loan interest rate promulgated by the People's Bank before are inconsistent with the present Notice, the present Notice shall prevail.