Massive deposits flowed out of China's four major state-owned banks as high inflation and low interest rates prompted savers to cash their money in the private lending market for better returns.

The China Securities Journal on Thursday reported that outstanding deposits at its four biggest banks fell 420 billion yuan ($65.7 billion) in the first 15 days September. The four banks were the Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Bank of China Ltd. and Agricultural Bank of China Ltd.

The report said it believed most of the withdrawals may have been transferred to the much higher yielding private lending markets. Strong borrowing from small businesses has propelled the private lending markets to grow rapidly in China in the last few months.

Borrowing rates in the private lending markets are 10 times higher than the official deposit rates, the report said. It has becoming increasingly popular especially with small businesses as government strengthened restrictions on bank lending in a bid to control inflation. As of August, China's inflation rate reached 6.2%.

The sharp decline in deposits has slowed down the lending capability of China's Big Four banks. The report noted the banks only gave out 87 billion yuan of loans in the first half of September.

New yuan loans issued by the four banks in August totaled 140 billion yuan, below the average 200 billion yuan in the previous two months.