BEIJING • Ant Group and at least a dozen banks are paring back their years-long cooperation on consumer lending platforms that fuel the spending of at least 500 million people in China.

Regulators have signalled their intention to curb online loans in recent months, prompting banks and Ant itself to discuss lending caps, said people familiar with the matter, asking not to be identified.

Banks in Zhejiang province have been instructed to cut their exposure to Ant via joint loans on the firm's Jiebei and Huabei platforms, the people said.

Some lenders in Shanghai have set a timetable for a gradual reduction in joint offerings, while at least one in Shandong has completely suspended ties with the firm, the people added.

The moves have taken place in parallel with Ant's discussions with the Chinese authorities on a restructuring plan. Bloomberg reported on Wednesday that Ant has agreed to become a financial holding company, making it subject to capital requirements similar to those for banks.

Consumer credit has been crucial in driving growth at Ant's digital finance business, which contributed 63 per cent of the firm's revenue in the first half of last year before the authorities unleashed a barrage of rules to curb the country's booming financial technology industry. Regulators also want to prevent any one firm from becoming too dominant.

The regulators upended a US$35 billion (S$46.7 billion) initial public offering by Ant Group in November last year, stunning investors from Shanghai to New York.

In a conference call with investors on Tuesday, Alibaba Group Holding chief executive officer Daniel Zhang said there is "substantial uncertainty" with Ant's business and it is difficult to assess the impact of the new regulations. Alibaba owns a third of Ant and both were founded by billionaire Jack Ma.

Ant declined to comment. The China Banking and Insurance Regulatory Commission did not respond to a request seeking comment.

Among the hardest-hitting for Ant was the proposal to impose additional capital requirements on microlenders and demand that fintech platforms put up at least 30 per cent of the funding for loans that are jointly offered with banks.

Before the proposal, only about 2 per cent of the more than 1.7 trillion yuan (S$351.3 billion) in loans remained on Ant's balance sheet, with the bulk of funding coming from its about 100 bank partners.

Capping joint lending with the banks may ease Ant's capital shortfall under the new rules. Ant needs to inject at least 70 billion yuan of new capital just for its credit-lending business to comply with the regulation, according to a November estimate by analyst Francis Chan at Bloomberg Intelligence in Hong Kong.

"While the restructuring would bring Ant a step closer to relaunching its initial public offering, all its units face more restrictions on capital, leverage and product pricing, risking growth," he said.

BLOOMBERG