The establishment of three private banks, including Webank by Internet giant Tencent, has been approved by regulatory authorities as it steps up financial reforms and opens up the banking sector.

Shang Fulin, Chairman of the China Banking Regulatory Commission (CBRC), announced the move on July 25 and said that the purpose of the reform is "to provide efficient and diversified financial services to the real economy."

Webank, located in Shenzhen, south China's Guangdong Province, will have two other main co-founders, Shenzhen Baiyeyuan Investment Co. and Shenzhen Liye Group, according to the commission.

The bank will mainly serve individual customers and small and micro businesses.

The other two banks are located in the eastern city of Wenzhou in Zhejiang Province and the northern municipality of Tianjin, said the CBRC.

Chint Group and Huafon Group are co-founders of the bank in Wenzhou, which targets local small and micro companies, individual businesses and residents, as well as clients in rural areas.

The bank in Tianjin, with Huabei Group and Maigou (Tianjin) Group as co-founders, will mainly engage in corporate banking services.

Experts said that the authorization will increase competition in the banking sector and improve financial services to the country's weak links such as agriculture and small businesses.

The CBRC said in March that China will set up five private banks on a trial basis. Each of the banks will be co-sponsored by at least two private capital providers.