SHANGHAI -- A guideline for China's Internet finance drafted by the central bank and other financial regulators will soon be released, said a central bank official on Sunday at a Shanghai forum.

The guideline seeks to "promote the healthy development of Internet finance". It has been reviewed and approved by the State Council, China's cabinet, and is due for release soon, according to Zhang Tao, a director with the People's Bank of China.

Internet finance has been used as a catch-all term in China, referring to loans, investments and other financial services provided through online channels rather than through banks and other financial institutions.

The guidelines will encourage innovation in Internet finance and lay out measures to ward off potential risks. It will also ensure fair competition and protect legitimate rights of investors.

"Internet finance is growing very fast and in general we think it has diversified offerings in the financial sector and can help address financial needs of small and micro firms and those in the countryside," Zhang said.

Over the past couple of years, the Internet has increasingly become a new channel to connect investors with lenders that have been under-served by Chinese banks. It has also become a popular sales channel for a wide range of wealth management products, from money market funds to borrowing money, to invest in the stock market.

While authorities recognized Internet finance as a compliment to traditional financial services and for allocating resource more efficiently, it has also warned of risks such as defaults, risk control and even fraud, in this unregulated sector.

Zhang also added that existing regulations will need to be amended to adapt to changes that come with the rise of Internet finance, but didn't specify which rules will be subject to change.