Repayments for more customers hit by Henan banking scandal

BEIJING • Chinese regulators on Friday offered repayments to more customers of rural banks whose withdrawals were frozen, in the ongoing saga of one of the country's biggest-ever banking scandals that triggered rare mass protests.

China's rural banking sector has been hit hard by Beijing's efforts to rein in a property bubble and spiralling debt, in a financial crackdown that has had ripple effects across the world's second-largest economy.

Four banks in Henan province froze cash withdrawals in mid-April as regulators cracked down on mismanagement, locking hundreds of thousands of customers out of their funds and sparking sporadic protests.

The provincial banking regulator in mid-July said individual customers with deposits of up to 50,000 yuan (S$10,200) would get their money back, after one of the largest protests erupted into violence.

Regulators have since been gradually offering repayments to more customers with deposits of higher value. On Friday, the Henan banking and insurance regulator promised to repay those who had deposited between 350,000 and 400,000 yuan, saying in a statement that this group would begin receiving the money tomorrow.

The statement added that "repayments of (deposit amounts) under 350,000 will continue to be paid", suggesting that not all customers with smaller bank balances had received their money yet.

The authorities have named the four banks, as well as another rural bank in nearby Anhui province, as being involved in a scheme to defraud investors, and launched a police investigation.

The Henan banking scandal has dealt an unprecedented blow to public confidence in China's financial system owing to the size and scale of the fraud, analysts say, with the banks involved allegedly operating illegally for more than a decade.

The Chinese authorities are desperate to avoid disruptions to social stability just months from a major congress of the ruling Communist Party of China.

A July 10 mass demonstration in Henan's provincial capital Zhengzhou was violently quashed, with demonstrators forced onto buses by police and beaten, according to eyewitness accounts and verified photos on social media.

AGENCE FRANCE-PRESSE