BEIJING - China's bank watchdog is preparing to consider a flood of applications to open private banks after it issued a directive on boosting the sector's development on Friday.

The China Banking Regulatory Commission (CBRC) said it would inform applicants of the results within four months, though the legal time limit for such processes is six months.

It has about 40 applications, all from domestic private enterprises, to consider, said CBRC chairman Shang Fulin.

More private banks will better serve the real economy and help finance the small enterprises the government hopes can become a new growth engine for the economy, Shang said.

The directive opened the door to private banks after a pilot was previously carried out to build a limited number of such institutions.

In 2014, the CBRC approved the establishment of five private banks, including Shenzhen-based Webank and Hangzhou-based MYbank.

Previously, China had only one private bank, China Minsheng Bank, founded in 1996 in Beijing.