China's banking regulator has asked the country's big five state-owned banks to increase provision against bad loans and to maintain their capital base after they extended a record amount of new yuan loans in the first nine months of this year.

The Industrial and Commercial Bank of China, the Bank of China, China Construction Bank, the Agricultural Bank of China and the Bank of Communications must raise their bad loan coverage ratio to above 150 percent by the end of this year, the China Banking Regulatory Commission said in a statement on its Website on Friday, quoting Vice Chairman Jiang Dingzhi.

In January, the CBRC imposed a 130-percent requirement on banks.

Chinese banks extended a record 8.67 trillion yuan (US$1.27 trillion) of new yuan loans between January and September, a 150-percent surge from a year ago. The amount of loans granted has already surpassed the 5-trillion-yuan target for this year.

"China's expansionary fiscal policies are causing growing concerns that banks are over-lending to risky projects, industries with overcapacity, and for investments in shares and real estate," said Yvonne Zhang, Moody's Investors Service's senior analyst. The outstanding loans at the big five banks contributed to 47.4 percent of the country's total at the end of last month. The increase in credit has, however, stabilized since July with an average growth of 200 billion yuan in the combined monthly new yuan loans.

The latest requirement from the CBRC followed other moves. For example, it said early last month that it has curbed some joint stock banks from granting new loans as their capital adequacy ratio fell close to the regulatory minimum of 8 percent. Last year, China raised the minimum ratio for public banks to 10 percent from 8 percent. The ratio will go up to 12 percent at the end of this year.

The outstanding non-performing loans fell to 520.8 billion at the end of June, down 42.7 billion yuan from the end of last year.