Shanghai banking regulator says steel trade loans under control

The exposure of Shanghai's banks to heavily-indebted Chinese steel merchants is under control, the city's banking regulator said, with a non-performing loan ratio of 1.31 percent.

Chinese banks are pursuing steel traders to recover loans that many borrowers say they cannot repay. The drive to recover the money is a sign of strain on China's financial system at a time when China's leaders are considering launching another package of incentives to boost the economy, and banks are worried about bad debts piling up.

Steel traders had an overall credit line of 185.3 billion yuan ($29.65 billion) with Shanghai's banking sector at the end of September, the Shanghai bureau of the China Banking Regulatory Commission said in an email on Friday.

Non-performing loans from steel traders stood at 2.4 billion yuan and the non-performing loan ratio was 1.31 percent, the bureau said.

"Right now the risk is under control," the bureau's statement said.

At the end of last year, China's steel industry had a total debt burden of $400 billion. Some of China's leading mills owe 200-300 billion yuan, according to the China Iron and Steel Association.

($1 = 6.2489 Chinese yuan)

(Reporting by Melanie Lee; Editing by Daniel Magnowski)