China's banking regulator has released guidelines to prompt large and medium-sized banks to set up inclusive finance divisions, a move to increase loans for money-starved small firms, agriculture and poverty relief.

Large lenders are required to complete the establishment by the end of the year and begin operation as soon as possible, according to the website of the China Banking Regulatory Commission.

Special credit policies should be made and mechanisms should be put in place for statistical accounting and risk management.

It was the latest government effort to improve weak links in the economy. Measures have been rolled out to encourage lending to those areas, such as allowing less deposit reserves.

A State Council meeting earlier this month allowed banks to tolerate a reasonably higher non-performing loan ratio for small and micro enterprises, agriculture and poverty alleviation. Monetary and credit policy incentives will be offered to banks that increase such lending.

By March, outstanding loans to small firms stood at 27.8 trillion yuan (4.05 trillion U.S. dollars), up 14.4 percent from a year ago, and agriculture related loans 29.2 trillion yuan, up 8.9 percent.

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