Analysts estimate the yield of Yu'E Bao, China's largest online WMP, will decline by at least 2 percentage points if the banks adopt the CBA's tougher practices. That fund might have to shift its focus to the riskier bond or foreign exchange markets in search of higher returns.

Internet finance is in, but is banking out?

Alibaba's 'Leftover Treasure' hits 43m users

Tian Hong Asset Management Co, which runs the 400 billion yuan ($65 billion) Yu'E Bao, has put more than 90 percent of its fund assets into negotiated deposits with banks.

Less than 7 percent has gone into fixed-income securities, which are usually the investments of choice for money market funds globally.

He Yingyan, a columnist with Sina Finance, wrote that the "privileges" enjoyed by money market funds were intended to protect them from possible defaults during a municipal investment bond crisis in 2011, and they can now be canceled.

He speculated that the authorities may reinstate the 30 percent cap for negotiated deposits in money market funds' investment portfolios.

Another reason for the association's suggestion was Premier Li Keqiang's call for control of rapidly expanding off-balance sheet transactions, especially interbank transactions.

On Thursday, the annual return rate of Yu'E Bao dipped to 6.09 percent from 6.44 percent a month earlier.

Xu Gao, chief economist with Everbright Securities Co, said the decline was mainly the result of extremely loose money market conditions. The rate may recover in late March as banks do their first-quarter reviews, Xu said.

An online survey by Sina.com showed on Wednesday that 70 percent said they would continue investing in online money market fund products.

Banks, online funds battle for larger share of savings

China's 'baby boom': cradle of financial reform?