The figure came after China's banking regulator reportedly ordered state-run banks to review their loans to local government investment firms amid fears of bad debts arising from rampant lending in 2009.

Total new lending in March was lower than the 700.1 billion yuan in new loans extended in February and well below the 1.89 trillion yuan issued in the same month last year, when Beijing called on banks to boost lending to stimulate the economy.

New yuan loans handed out in the first quarter reached 2.6 trillion yuan compared with 4.6 trillion yuan in the same period last year, the People's Bank of China said on its website.

China has powered out of the global financial crisis on the back of a four-trillion-yuan (586-billion-dollar) stimulus package and state-sanctioned bank lending that saw loans nearly double to 9.6 trillion yuan in 2009.

The government has set a loan target of 7.5 trillion yuan this year as it clamps down on lending to calm inflationary pressures, fearing a property bubble and economic overheating as well as a surge in bad debts.

Policymakers have raised bank reserve ratios twice since the start of the year -- effectively limiting the amount of money banks can lend -- and increased interest rates on benchmark three-month and one-year Treasury bills.

In a sign policymakers are worried bad debts are threatening to derail the economy, China Banking Regulatory Commission chairman Liu Mingkang said Sunday banks had been ordered to reassess all loans made to local government companies on a "project-by-project" basis, the Wall Street Journal reported.

"By the end of this coming June, all of the banks are required to submit comprehensive reassessment reports to us about that area's exposure," Liu told an Asian economic forum.

Regulators would follow up in the third quarter with on-the-ground inspections and, if problems are discovered, could require banks to change the terms of some loans, ask for more collateral or write down the value of loans.

The strict timetable has been backed by Prime Minister Wen Jiabao and Wang Qishan, the vice-premier in charge of economic affairs, Liu told the Boao Forum for Asia.

Liu and other regulators, including central bank governor Zhou Xiaochuan, have warned in recent months about the risks from lending to local government companies, the newspaper said.

Many of the stimulus projects that city and provincial authorities lined up were not paid for by government spending, but by off-budget financing vehicles that borrowed heavily from banks and capital markets, the paper said.

Much of the borrowing was funnelled into real estate development projects, fuelling fears of a damaging bubble forming in the property market.

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