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China allows to set up three to five private banks under a pilot scheme

China has approved a pilot program to allow establishment of three to five private banks, as the country gears up to extended financial support for cash-ridden smaller firms.

After a meeting on banking supervision, the China Banking Regulatory Commission (CBRC) said in a statement that it would maintain "prudential regulatory standards", while allowing the establishment of private banks, reported Reuters.

"The first-batch of three to five private banks will be set up under a pilot scheme," CBRC told the news agency. Although, it further explained that a private bank would be set up only when conditions are met.

The recent move by the Chinese government follows after many leaders urged to open up the banking sector for private players, so that it could facilitate better banking services to customers and firms, alike.

It is expected that the launch of private banks will fuel competition in the banking sector, while offering easy financing to the small- and medium-sized enterprises (SMEs) in the nation, which account for 60% of China’s gross domestic product and nearly 75% of new jobs.

Retailer Suning Commerce Group and the internet company Tencent Holdings are among the companies, which have shown interest to form private banks.