Banks set to cap rates on Internet funds

China's burgeoning online financial sector is hitting some obstacles, with banks being advised by an industry body to hold Internet-based funds to the terms of deposits.

In a recent internal meeting, the China Banking Association specified the interest rates on the funds' bank deposits, and it told member banks to "strictly observe" the specifications, the Economic Daily reported.

Banks are being urged to cap deposit rates at 1.1 times the central bank's benchmark rate and charge penalties on premature withdrawals of fixed deposits, the report said.