Zhangjiagang Rural Commercial Bank has received the approval of the China Securities Regulatory Commission last week to go ahead with its planned initial public offering, which is set to raise at least 2.3 billion yuan ($354 million).

It is now the fifth rural commercial bank waiting to make its IPO on the A-share market.

Wuxi Rural Commercial Bank Co Ltd, Jiangyin Rural Commercial Bank Co Ltd, Changshu Rural Commercial Bank Co Ltd and Wujiang Rural Commercial Bank Co Ltd are the other four in the IPO queue.

Market experts said they have observed a pattern among rural commercial banks. Some of them are seeking to go public in order to expand both their capital and business.

The IPOs of the five lenders, whose performance in recent years has been varied, may have different outcomes though, said analysts.

Another 15 rural commercial banks have been preparing to submit IPO applications to the regulator. Some of them wish to list in Shanghai, Shenzhen or Hong Kong, while at least six are eyeing the National Equities Exchange and Quotations, an over-the-counter board, according to the China Stocks Journal.

By April-end, China had around 1,000 rural commercial banks, according to the CBRC. Their combined capital accounted for 67 percent of all rural financial institutions, including rural credit cooperatives, rural commercial banks and rural cooperative lenders. They contribute 71 percent of all rural financial institutions' combined profits.

According to an EY annual report on China's banking industry in 2015 released last month, rural banks managed to post high double-digit growth due to their small size, and great emphasis on fee-based businesses, while large commercial banks reported slower, single-digit growth.

Analysts said rural commercial banks need to tackle issues of rising non-performing loans and try to diversify their business models.

According to the CBRC, by the end of the first or January-March quarter, rural commercial banks in China reported combined non-performing loans of 206 billion yuan, 19.8 billion yuan higher than the last or October-December quarter of 2015.

The average NPL rate was 2.56 percent in the first quarter of this year, higher than 2.17 percent of the last quarter of 2015.

Micro businesses

Rural commercial banks most often loan to micro businesses and small enterprises. The latter are fragile when facing cyclical fluctuations, which may put pressure on liabilities when economic growth slows down or economic structure is transforming, according to the prospectus of Zhangjiagang Rural Commercial Bank.

It is also essential for rural commercial banks to strengthen their risk control systems to win investors' confidence, as their risks are well diversified, and given that their borrowers are very often from the same sectors, regions, and business models, according Guo Tianyong, a professor at the Central University of Finance and Economics.

A research note from Haitong Securities Co Ltd said that the to-be-listed rural commercial banks, and others mulling IPOs, need to strengthen internal governance and prevent systemic risks.