Chinese authorities have promised to repay customers, whose funds were frozen by rural banks, in a bid to pacify them, media reports said. 

Starting 15 July 2022, customers of the four banks in the Henan province and one in Anhui will be repaid “in advance”, local branches of the China Banking and Insurance Regulatory Commission said in a statement. 

Payments will be made in batches and customers with deposits of up to CNY50,000 will be repaid first.

The announcement follows demonstrations by hundreds of bank customers on 10 July 2022, demanding the authorities to return their deposits.

Around 1,000 people gathered outside the regional branch of the Peoples Bank of China in Zhengzhou, Henan’s capital, which escalated into violent clashes since the protests first began in May.

Earlier in April, several banks froze deposits of retail customers and based on Chinese media reports, the deposits could be worth up to $1.5bn. 

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By GlobalData

Although an investigation for possible fraud is still underway, the public outcry has forced the banking regulator to come up with a plan to resolve the issue. 

“The latest move shows the local government is trying to maintain social stability by advancing a small amount of payments out of their pockets,” China Merchant Securities chief bank analyst Liao Zhiming was quoted by Bloomberg as saying. 

Some customers won’t receive full payment of their large funds because the funds are not considered deposits and are not covered under the state’s deposit insurance scheme, he added.

According to the publication, the investigation has revealed that Henan Xincaifu Group Investment Holding, which has stakes in the five banks in question, orchestrated a fraud with bank employees. 

The accounts were frozen as part of the investigation, which revealed that the accused took deposits and marketed financial products via an online platform, then moved deposits by faking loan agreements.