UPDATE 2-China's Jan-Oct new yuan loans 3.7 trln yuan-PBOC

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BEIJING, Nov 11 (Reuters) - New Chinese local-currency bank loans totalled 3.7 trillion yuan ($542 billion) in the first 10 months of the year, an official of the People's Bank of China said on Tuesday.

New yuan lending in the first nine months totalled 3.48 trillion yuan, pointing to 220 billion yuan in fresh credit having been extended in October alone.

That would compare with 374.5 billion yuan in September and 136.1 billion yuan in October 2007.

The official was relaying excerpts of an interview that the PBOC gave to Xinhua news agency setting out how the central bank plans to play its part in implementing the government's monetary and fiscal stimulus package announced on Sunday.

Xinhua did not distribute the interview over its main newswires.

The country's three "policy banks", which lend explicitly to promote government goals, would extend 100 billion yuan in credit to finance major investment projects this year, the PBOC official said.

State television cited vice central bank governor Su Ning as saying that Chinese banks would extend a total of 4 trillion yuan in new yuan loans this year.

The report added that the central bank would also "flexibly adjust monetary tools such as benchmark interest rates and reserve requirements" to ensure ample liquidity and steady credit growth to support the economy.

China would also further develop its bond market to widen fund-raising channels for companies, it said, without elaborating.

Bank of China (3988.HK), one of China's big four state banks, said it had decided to step up its lending to support the government's economic stimulus plan.

In a statement on its website, the bank said it would scrap new yuan lending limits that it had imposed on its regional branches. The Chinese government announced on Sunday that the central bank would stop enforcing a strict quota system to cap commercial bank lending.

The Bank of China said it would direct its lending towards railways, airports, urban infrastructure, high-tech projects, hospitals, schools, the power grid in rural areas, property, earthquake-hit zones, small businesses and exporters. (US$1=6.827 yuan) (Reporting by Langi Chiang and Zhou Xin; editing by Tony Austin)