China's banking watchdog issued a set of regulations on Wednesday, aiming to tighten supervision of the country's booming peer-to-peer (P2P) lending industry.

The document imposes a series of restrictions on P2P platforms, prohibiting them from accepting public deposits, pooling investors' money for their own projects, providing guarantees for lenders, or selling financial products, according to the China Banking Regulatory Commission's (CBRC) website.

P2P lending, lenders without a traditional financial intermediary such as a bank, has seen rapid growth in China in the past few years, as investors seek higher returns, and small businesses find it easier to secure funds through P2P platforms.

The lack of supervision, however, causes considerable risks. Fraud, fund flight and illegal fundraising are common, and some investors have been left out of pocket as many P2P platforms went bust.

At the end of June, there were 1,778 P2P lending platforms with operational problems, accounting for more than 40 percent of the total. Outstanding loans issued by P2P platforms has reached 621.3 billion yuan (about 93.6 billion U.S. dollars), according to CBRC data.

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