Financial services in rural areas are imbalanced and legislation is needed for more coordinated development of the sector, China's top banking regulator said on Thursday.
Shang Fulin, chairman of the China Banking Regulatory Commission, said the watchdog will speed up reform of rural financial institutions while promoting legislation on rural financing.
He made the pledge while giving a report to the National People's Congress Standing Committee.
"The current rural financial system cannot provide efficient services to farmers, and the problem is especially severe in central and western regions," Shang said.
In addition, emerging institutions, such as some rural capital cooperatives among farmers, are without regulation, the potential risks of which cannot be ignored, he said.
"At present, we lack a mechanism that could turn idle funds into credit. Farmers generally are not financially capable enough to absorb natural risks in agricultural production, and market risks."
Shang said some of the problems cannot be addressed by market forces and administration policies. There are urgent demands on the legislative process "especially in terms of mortgage standards, client protection and curbing capital outflows from rural areas", he said.
In a statement issued after a meeting chaired by Premier Li Keqiang last week, the State Council, China's cabinet, called for more loans for the agricultural sector and small businesses.
Shang said the government will strengthen reforms of rural banks, such as rural cooperatives, branches of the Agricultural Bank of China and Postal Savings Bank of China, and encourage private capital to play a bigger role in transforming the banks.
Innovation on rural financing products and services will be promoted aggressively, while agricultural companies will be encouraged to take in funds through securities sales and issuance of bills, he said.