SBV circular regulates consumer lending
HA NOI (VNS) — The State Bank of Viet Nam (SBV) recently released a draft circular on consumer lending following the setting up by commercial banks of subsidiary finance companies for the purpose.
The circular aims to specify and limit risks on consumer loans of commercial banks to non-standard clients, including those with either low incomes or credit scores, or with no credit history.
According to SBV, there are currently no specific legal regulations on finance companies’ consumer lending, which is becoming increasingly important to the country’s socio-economic development and is helping to raise people’s living standards.
Commercial banks and finance companies are the two major providers of consumer lending in Viet Nam, so the promulgation of a law to regulate this activity is essential, the SBV said.
In recent years, several commercial banks have set up subsidiaries for consumer lending, including HDBank, which bought Viet-SG Finance Company, and VPBank, which purchased Viet Nam Coal-Mineral Finance Company.
Also, a number of foreign companies with experience in consumer credit were likewise setting up finance companies for consumer lending in Viet Nam. The SBV predicted the setting up of subsidiaries in consumer lending to become a major trend in the coming years.
According to the draft, recently released for comment, finance companies will be allowed to provide consumer lending through hire-purchase arrangements, overdraft via credit cards and issuance of buyers’ passes.
The draft also said the interest rates would be based on agreements between finance companies and consumers which, in turn, would be based on consumers’ solvency and compliance with the SBV regulations on interest rates.
Interest rates on overdue debts must be made public and will not be allowed to exceed 150 per cent of the interest rate for consumer lending that had been agreed on in the lending contracts. — VNS