Banks propose raising small loan cap to 400 million VND

A customer borrows at a bank in Hanoi. (Photo: vnbusiness.vn)

Credit institutions have proposed to raise the cap of small loans not requiring feasible capital use plans and related person information from 100 million VND to 400 million VND (15,710 USD).

The proposal was made as the State Bank of Vietnam (SBV) has recently published draft amendments to the Circular 39/2016/TT-NHNN regulating lending activities of credit institutions and foreign bank branches to customers. Accordingly, for small loans not exceeding 100 million VND, borrowers will not have to provide feasible capital use plans and related person information to credit institutions.

The draft policy aims to simplify procedures for granting loans with small value, which will contribute to creating more favourable conditions for customers to access bank credit for daily life and consumption demands to minimise illegal usury. Besides, it will help banks expand lending activities.

Banks suggested raising the value limit  for small loans, especially credit cards and overdrafts, because borrowers often ask for such small loans to meet consumer needs so it is difficult for them to have adequate and accurate reports to prove feasible capital use plans.

For loans with small value, it is not feasible to require borrowers to provide reports on loan capital usage and prove that the loan is used for the correct purpose stated in the loan agreement, banks explained.

Besides, credit institutions propose that the circular issue simpler regulations on documents and procedures to prove borrowers' financial capacity, purpose of capital use and inspection of loan use for small value loans.

Regarding the draft regulation, Mai Thị Trang, deputy director of the SBV’s Monetary Policy Department, said the law currently does not have regulations on a small value. It is almost a new concept. The drafting committee has decided to choose the 100 million VND mark as a small value after referring to a number of regulations on consumer loans of finance companies. Under Circular 43/2016/TT-NHNN on consumer loans of finance companies, the cap for consumption outstanding loans does not exceed 100 million VND.

In addition, the committee has also based on Circular 06/2023/TT-NHNN that regulates outstanding loans for individual customers to serve life needs. Under the circular, outstanding loans of an individual borrower at a credit institution must not exceed 100 million VND.

At the same time, according to the latest statistical report of the General Statistics Office, Vietnam’s GDP per capita in 2023 is estimated to reach about 101.9 million VND.

Therefore, the mark of 100 million VND is the legal basis for the drafting committee to research and propose that a small loan is worth 100 million VND in the draft circular./.