Non-banking financial organizations engaged in insurance, trust, financial or insurance assets management, financial leasing and auto financing have been allowed for the first time to borrow and lend money on China's interbank market as of Aug. 6.

Under a formal method on interbank lending market released Monday by the People's Bank of China, a total of 16 types of financial institutions have become eligible to apply for the access to the market, covering "all banking institutions and most non-banking financial institutions.

Analysts said that the new market players would help improve the transparency of financial market, break down the capital barriers among banks, securities, insurance and funds, and facilitate the interest rate reform.

The regulations also extended the maximum term for interbank lending by commercial banks, urban and rural credit cooperatives and policy banks from the previous four months to one year.

New players such as financial assets management companies, financial leasing, insurance and auto financing are allowed to borrow or lend for three months at most while companies engaged in financing, securities, trust and the management of insurance assets, for only seven days.

The maximum borrowing limits for interbank lending also vary with the qualifications of financial institutions, with commercial banks, urban and rural credit cooperatives and policy banks allowed to borrow eight percent of their major liabilities.

Interbank lending market is where financial institutions buy or sell funds needed to meet their reserve requirements in short term. Established in 1996, the market has seen 703 market participants by the end of 2006 with an annual trade volume of 2.15 trillion yuan, over 10 times of the original volume ten years ago.

The Shanghai Interbank Offered Rate was introduced in last September as a major inter-bank offered rate and has become one of the most important interest rate index for China's monetary market.

Zhou Rongfang, deputy director of the Financial Market Department of the Shanghai Headquarters of the People's Bank of China said in late June that financial institutions would gain more autonomy in participating in interbank market operation and managing risks control.