BEIJING, Jan. 28 -- China's banking regulator has approved the opening of a second private bank to help finance cash-starved smaller borrowers.

The Shanghai Huarui Bank Co., Ltd., set up in the China (Shanghai) Pilot Free Trade Zone, was given the nod on Tuesday by the Shanghai Banking Regulatory Commission, the commission announced on Wednesday.

Its opening, likely to come within six months after it secures a license and business registration from local banking and business regulators, will follow the establishment of WeBank in Shenzhen early this month.

With a registered capitalization of three billion yuan (490 million U.S. dollars), the private bank will take deposits, grant loans, handle settlements and other services.

Small, privately-owned companies have long struggled to get loans from state-dominated banks. To give smaller borrowers more access to financing, the country's banking regulator granted licenses to five privately-owned lenders last year.