The move is designed to avoid spillover financial risks brought by the rapid development of the financial technology sector, according to a statement of China's Banking and Regulatory Commission (CBIRC).

The financial arms of big tech companies including Ant Group, JD Digits, and Baidu Inc-backed Du Xiaoman Financial have been offering high-yield deposits at local banks on their apps.

While the takeoff of China's fintech sector has helped such business grow rapidly in recent years, it has brought hidden risks related to information disclosure and product management, the CBIRC said.

Local lenders attracting deposits nationwide with the help of internet platforms are suspected of violating regulatory rules that limit smaller city banks to drawing business from their home market, the regulator added.

These, usually high yield, deposit products, are exacerbating a liquidity crunch among lenders, and could be " violating the requirement of interest rate pricing mechanism", CBIRC said in a separate notice.

Ant, JD Digits and Du Xiaoman said in December that they had stopped allowing individuals to deposit funds with banks via their online platforms.

(Reporting by Cheng Leng and Ryan Woo; Editing by Jan Harvey & Simon Cameron-Moore)