New loans from China's biggest state-owned banks came at lower in April with rising percentage of non-performing loans in the banking system, keeping regulators on alert.

Four biggest state-owned banks extended a combined 245 billion yuan in new loans in April, compared with 370 billion in January and 330 billion in March, the 21st Century Business Herald reported, quoting sources from the banks.

The four banks---Industrial and Commercial Bank of China, the Bank of China, Agricultural Bank of China, and China Construction Bank---usually account for 30 percent of new yuan loans issued by China's whole banking system.

The 21st CBH report pointed to massive outflow of deposit in banking system at the begging of the quarter. The four banks lost as much as 1.7 trillion yuan in the first week of April and new deposit fell 134 billion from the previous month despite hiking efforts to banks to attract depositors.

Demands for long-term loans remain robust as urbanization in the country increases and property market sizzles-although effects of a new round of cooling policies on property are yet to be seen.

On the other hand, it's still early to talk about a recovery in the real economy and a shift from the investment-driven growth model. With uncertainties ahead for small enterprises, commercials banks are facing weakening asset quality.

Outstanding non-performing loans rose 20.7 percent to 524.3 billion yuan at the end of March, the 21st CBH said, citing a source close to regulators, marking the six consecutive quarterly increase while non-performing loan ratio in commercial banks stood at 0.99 percent, up 0.02 percent from that at the start of the year.

While warning of a continued rise in non-performing loans in the future, regulators are more alert about hidden risks in the banking system as banks are motivated to hide bad assets, the report said.

"The fact that past due loans have outpaced non-performing loans since the second quarter, and that the ratio of debts at least 90 days over due to NPL has risen substantially from historical average, has to a certain extent reflected misreporting of the five-tier loan classification," the source said.

The China Banking Regulatory Commission has already ordered banks to conduct a self-check of the accuracy of their classification of assets, as part of a boarder campaign to control hidden risks in banks.