China places restrictions on large cash withdrawals amid rising NPAs, bank runs

The Communist Party of China has put strict curbs on cash withdrawal from banks amid fears of bank runs and the rising number of non-performing assets in the wake of coronavirus pandemic. The restrictions have been imposed as a pilot project in Hebei province of China and will subsequently be implemented in two more regions, Zhejiang and Shenzhen, by October, Bloomberg quoted the People's Bank of China as saying.

Around 70,00,000 people in these three provinces will be affected due to the cash withdrawal restrictions. As per government agencies, these curbs were announced after local governments, police and banks failed to persuade people not to throng banks in large numbers to withdraw all their cash.

The People's Bank of China said the move will keep the "unreasonable demands of large amounts of cash" in check, while regulators will ensure the people's normal needs for large transactions is also taken care of, the news agency reported.

Under this two-year project, limits have been imposed on cash withdrawals for individuals and businesses. Individuals withdrawing between 1,000-300,000 yuan and businesses withdrawing more than 500,000 yuan will require prior government approval, the report said.

The decision has reportedly been taken as people have been thronging the government banks to withdraw money in large sums in the wake of various reports of banks' inability to pay back customers their hard-earned money. This has forced authorities to impose limits on the cash withdrawals.

Chinese banks are also trying to quell rumours of banks' inability to pay back. Baoding Bank in the Baoding city of Hebei province  recently released a statement, urging people not to believe in rumours and not withdraw all their cash from the banks. The similar statement was issued by Yangquan Commercial Bank after rumours over its declining financial health. The current situation has risen in the wake of Chinese government baling out several struggling banks last year.

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