Citigroup Inc, the largest US bank, said yesterday that China's banking watchdog has approved its plan to open two microcredit firms in Hubei Province, tapping the nation's vast rural market.

Citigroup, the first overseas lender allowed to establish such institutions in the country, plans to set up the two firms in Gong'an county and the city of Chibi, which are scheduled to open in the next few months.

The move comes as major rivals including HSBC and Standard Chartered are opening rural outlets in order to expand in the nation's underdeveloped regions and the government is relaxing controls on private financing to support thousands of small and cash-strapped manufacturers.

Citigroup, which has eight branches and 20 sub-branches on the mainland, was one of the first locally incorporated foreign banks in China. The financial giant, which has a stake in Shanghai Pudong Development Bank as well as de facto management control of Guangdong Development Bank, said Gong'an and Chibi have tremendous lending needs due to their rapidly developing agriculture and robust economies.

"We feel very excited and proud of being allowed to set up the microcredit firms," said Citi China CEO and Chairman Andrew Au. "It's a very important new element in the process of Citi's operation and investment in China. We deeply understand the urgency to expand finance services in China's rural areas, a goal we believe could be achieved by the mode of setting up microcredit companies."