The China Banking Regulatory Commission (CBRC) said the auto loan sector has "relatively big risks" for lenders due to an incomplete credit reporting system and fluctuations in auto prices.

The commission said in a circular that Chinese courts are currently dealing with large numbers of lawsuits against borrowers and auto dealers offering loan guarantees.

It added that the high rate of litigation suggests that car loan approvals are not sufficiently stringent or loan portfolios are poorly managed, and urged lenders to address these issues.