China’s commercial banking sector has managed to keep its official nonperforming loan (NPL) ratio steady for the past year, with the latest data from the industry regulator showing bad debts amounted to 1.74% of outstanding loans for the fourth straight quarter. But the number masks a significant and growing divergence between the performance of the big state-owned banks and smaller lenders, numbers released on Friday by the China Banking Regulatory Commission (CBRC) show. The average NPL ratio of large banks in the first three quarters stood at 1.54%, down 14 basis points from the end of 2016. Smaller banks, particularly city commercial banks, who have been more aggressive in their lending practices and tend to make riskier loans, saw their average NPL ratio increase to 2.95% at the end of the third quarter from 2.49% at the end of 2016. Bankers familiar with the matter told Caxin that some local government officials have been interfering in NPL reporting in their jurisdictions.