Circular 06 creates 'barriers' to accessing credit capital, what does the State Bank say?

New regulations of Circular 06

According to the State Bank of Vietnam, Circular 06 does not tighten lending conditions for customers. This Circular even removes many contents to create favorable conditions for customers to access bank credit capital, contributing to providing more capital for production and business activities, and restoring economic development.

Specifically, for the need to borrow capital to serve essential consumer needs, personal and household consumption purposes, such as borrowing to buy a car, buy a house, buy consumer equipment, etc., customers do not need to have a plan or project.

Circular 06 creates a new state bank credit capital market, what does it say? Image 1 — The State Bank affirmed that Circular 06 does not tighten lending conditions for customers. (Photo: MP)

Accordingly, the customer's capital usage plan only needs information on the total capital needed, the purpose of capital usage, the duration of capital usage, and the customer's debt repayment source, without having to develop a specific plan or project to serve the customer's living needs.

For capital loan needs to serve life to buy houses, build, renovate houses; receive transfer of land use rights to build houses which are often of great value, new customers must supplement the plan and project in the loan application for this capital need so that credit institutions (CIs) have full information about the purpose of the customer's loan and to ensure supervision of the customer's use of the loan for the right purpose.

Supplementing regulations that credit institutions are allowed to consider and decide to lend to customers to repay loans at other credit institutions for the purpose of borrowing to serve living needs.

Specifically, in the current Circular 39/2016/TT-NHNN, customers are only allowed to borrow to repay loans at other credit institutions for loans serving production and business, not applicable to loans serving living needs.

The expansion of regulations for customers to repay debts at other credit institutions, applicable to both loans for business activities and living needs, will create conditions for customers to access more bank credit capital and have more opportunities to choose better services and utilities at other credit institutions (if any).

For example, an individual customer has outstanding debt for a home loan at bank A. However, the customer finds that at bank B, the same home loan has a lower interest rate than bank B; at the same time, if the customer borrows capital, he will enjoy additional incentives for some other services at bank B.

Accordingly, with this regulation, customers can completely go to bank B to propose a loan request to repay the home loan early that the customer is borrowing from bank A. Thus, customers can easily access a new loan with a lower cost, and access and use new services.

Circular 06 also adds that credit institutions are allowed to consider and decide to lend to customers to repay foreign loans in the form of deferred payment for goods. Foreign loans in the form of deferred payment for goods are international goods trading activities, so Circular 06 adds the above provisions to facilitate customers to borrow capital to serve this need.

Circular 06 does not tighten lending conditions for customers.

According to the current Law on Credit Institutions, customers borrowing capital must meet 3 conditions: Legal loan purpose, Have a feasible capital usage plan and Have financial capacity to repay the debt. These are the minimum loan conditions that customers must meet according to the Law on Credit Institutions.

Similarly, the current Circular 39/2016/TT-NHNN also applies these conditions. Specifically, in Article 7 of Circular 39/2016/TT-NHNN, credit institutions consider and decide to lend when customers meet the following conditions: Customers are legal entities with civil legal capacity as prescribed by law. Customers are individuals aged 18 years or older with full civil act capacity as prescribed by law or from 15 years to under 18 years old who do not lose or have limited civil act capacity as prescribed by law; Need to borrow capital for legal purposes; Have a feasible capital use plan; Have financial capacity to repay the debt.

Regarding security measures in credit granting activities, the application or non-application of security measures is agreed upon by the credit institution and the customer. This creates favorable conditions for the credit institution to be proactive in credit granting activities and to negotiate with the customer in the process of managing the customer's loan and debt repayment.

In fact, in recent times, credit institutions have been implementing many measures to secure loans with many different types of assets, such as cars, future assets, circulating goods, debt claims, etc., or lending without collateral based on the assessment of effective production and business plans and projects, which are assessed by credit institutions to have the financial capacity to repay the loan in full and on time, both principal and interest. Collateral is only one of the important conditions, but it is not the top condition, nor is it a mandatory condition according to the law in ensuring loan repayment, enhancing customers' responsibility for repaying bank loans.

Source