China's banks only used 26 percent of the 50-billion-yuan(US$6.61 billion) quota granted to qualified domestic institutional investors (QDIIs), the China Banking Regulatory Commission (CBRC) said on Monday.

The CBRC said that it had approved 22 banks, both domestic and foreign-funded, as QDIIs by the end of June but they took only 13 billion yuan out of the total, including 10.5 billion yuan and US$336 million.

Institutional and individual investors prefer to keep hold of their yuan instead of investing overseas because they expect the yuan to continue to appreciate, experts explained.

"Despite an ordinary start, the QDIIs have great potential as they have made the first step to representing their domestic clients in investing overseas, including investing in Hong Kong's stock market," said Luo Ping, a senior official with the CBRC.

QDIIs, one of China's efforts to ease the appreciation pressure on the yuan and help reduce China's excessive liquidity, had been deterred from overseas investment by China's rebounding stock markets, experts said.

The benchmark Shanghai Composite Index, which nearly doubled in 2006, closed at 4213.36 points on Monday, up 3.81 percent, or 154.51 points.