New loans denominated in the yuan totaled 551.6 billion yuan ($84.9 billion) in May, compared with 739.6 billion yuan ($113.8 billion) in April, said the central bank.

The May figure brought the amount in the first five months to nearly 3.55 trillion yuan ($546.2 billion), a decrease of 12 percent from the same period last year.

Policymakers have been pulling on a variety of levers to rein in bank lending amid fears over inflation and frothy house prices.

"The May monetary data suggest the prudent monetary policy is bearing fruit," said Zhuang Jian, a senior economist with the Asian Development Bank.

But it is necessary to increase policy flexibility to strike a balance between maintaining growth and combating inflation, he said.