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Vietnam: Lending in cash under stricter regulations
The Hanoitimes – The State Bank of Vietnam has tightened lending regulations, not allowing credit institutions and foreign bank branches to disburse loans in cash effective from April 2 this year, according to a new circular.
Under Circular No.21/2017/TT-NHNN, which stipulates the mode of disbursement of loans by credit institutions and foreign bank branches to customers, the lenders will have to disburse loans to bank accounts of beneficiaries via non-cash payment instruments.
According to the central bank, the new circular is aimed to better supervise loans, making them in compliance with loan purposes. The disbursement of loans through bank accounts will help commercial banks supervise the use of borrowers’ loans from the beginning to avoid them use the funds for wrong purposes such as rollover, resulting in non-performing loans as seen in many cases previously.
Under the new circular, the lenders must disburse the loan to the borrower’s bank account if it is required by laws that money shall be transferred from the borrower’s bank account and in compliance with the loan purpose.
The disbursement through bank accounts is also required if the borrower has made payments in connection with business plans approved by the lenders; or the borrower directly pays individuals or households for agricultural products in compliance with loan purpose.
However, the lenders may consider disbursing loans to the borrower in cash if the beneficiary does not have bank account at any bank; or the borrower does not have bank account at any bank and has made payments in connection with business plans approved by the lenders.
The new circular also regulates that the lenders may consider disbursing loans either in cash or via non-cash instruments if the amount to be paid to the beneficiary (who has a bank account) does not exceed VND100 million (US$4,400); or the borrower will make payments to the beneficiary who is State-owned organization and allowed to use cash in payment.
SBV early this year also issued a document asking credit institutions and branches of foreign banks to push the resolving of non-performing loans in 2018.
Accordingly, each bad debt must be reviewed and evaluated to provide a comprehensive picture about non-performing loans, mortgage assets and ability to reclaim debts, from which measures will be raised for resolving bad debts effectively.
Lenders have also been asked to cooperate with the Viet Nam Asset Management Company in handling bad debts and mortgaged assets sold to this company.
In addition to this, the selling of bad debts at market prices must be promoted, SBV said.
Central bank Deputy Governor Le Minh Hung said 2018 would be a special year for the banking sector to handle bad debts following the National Assembly resolution 42/2017/QH14.
The central bank is completing circulars about credit risk management in sectors such as real estate, securities and build-transfer (BT) and build-operate-transfer (BOT) projects and internal audit to prevent risks.
According to Trinh Quoc Trung from the University of Economics and Law, it is critical to improve the management capacity of credit institutions to ensure the safe operation of the banking system.
Economic expert Nguyen Tri Hieu said the handling of bad debts also required the co-operation of relevant agencies such as police and local authorities to effectively handle mortgaged assets.
He said transparency in shareholdings at banks must also be improved.
Resolution 42 allows individuals to buy bad debts. But the lack of debt trading market also hindered the handling of non-performing loans, Hieu said, adding the development of such a market must be of great importance.
Under the new circular, the lenders must disburse the loan to the borrower’s bank account if it is required by laws that money shall be transferred from the borrower’s bank account and in compliance with the loan purpose.
The disbursement through bank accounts is also required if the borrower has made payments in connection with business plans approved by the lenders; or the borrower directly pays individuals or households for agricultural products in compliance with loan purpose.
However, the lenders may consider disbursing loans to the borrower in cash if the beneficiary does not have bank account at any bank; or the borrower does not have bank account at any bank and has made payments in connection with business plans approved by the lenders.
The new circular also regulates that the lenders may consider disbursing loans either in cash or via non-cash instruments if the amount to be paid to the beneficiary (who has a bank account) does not exceed VND100 million (US$4,400); or the borrower will make payments to the beneficiary who is State-owned organization and allowed to use cash in payment.
SBV early this year also issued a document asking credit institutions and branches of foreign banks to push the resolving of non-performing loans in 2018.
Accordingly, each bad debt must be reviewed and evaluated to provide a comprehensive picture about non-performing loans, mortgage assets and ability to reclaim debts, from which measures will be raised for resolving bad debts effectively.
Lenders have also been asked to cooperate with the Viet Nam Asset Management Company in handling bad debts and mortgaged assets sold to this company.
In addition to this, the selling of bad debts at market prices must be promoted, SBV said.
Central bank Deputy Governor Le Minh Hung said 2018 would be a special year for the banking sector to handle bad debts following the National Assembly resolution 42/2017/QH14.
The central bank is completing circulars about credit risk management in sectors such as real estate, securities and build-transfer (BT) and build-operate-transfer (BOT) projects and internal audit to prevent risks.
According to Trinh Quoc Trung from the University of Economics and Law, it is critical to improve the management capacity of credit institutions to ensure the safe operation of the banking system.
Economic expert Nguyen Tri Hieu said the handling of bad debts also required the co-operation of relevant agencies such as police and local authorities to effectively handle mortgaged assets.
He said transparency in shareholdings at banks must also be improved.
Resolution 42 allows individuals to buy bad debts. But the lack of debt trading market also hindered the handling of non-performing loans, Hieu said, adding the development of such a market must be of great importance.
Source: http://www.hanoitimes.vn/economy/2018/04/81E0C42B/lending-in-cash-under-stricter-regulations/