Econ
Central bank tightens consumer credit control
The State Bank of Vietnam has instructed credit institutions (CIs) to closely supervise and obey current legal regulations related consumer lending in a move to make the service develop healthy.
According to Document No. 3436/NHNN-TTGSNH issued recently, CIs must review their internal regulations to ensure it in accordance with the law, especially those on consumer lending, debt management, and issuance and supply of credit card services.
Besides strictly complying with the regulations, especially those on interest rates and fees, they must also make public their lending activities, such as standardized contracts listing, providing clients with information on lending rates, as well as establishing concrete interest rates determinants, including adjusted rates, overdue rates and other extra charges, before finalizing a loan agreement.
The SBV also ordered credit institutions to tighten credit control, by making timely malpractice detection and strictly handling violations of consumer lending regulations to protect customers’ interests.
Regarding specialized consumer finance companies, the SBV is working on promulgating more in-depth regulations on uniform loan interest rates across the entire market to prevent fraudulent lending.
The move was made after the Department of Competition and Consumer Protection under the Ministry of Industry and Trade said it received many complaints from consumers related to the well-known consumer lender FE Credit.
The complaints focused primarily on malpractice in FE Credit’s customer service, such as shady loan transactions and verbal harassment towards consumers from staff working in the debt recovery department in 2017 and the first quarter of 2018.
The SBV’s Banking Supervision Agency (BSA) announced that it will make an annual inspection on FE Credit this year. The inspection is a periodic plan already announced by the SBV at the end of 2017, ensuring financial protection for credit institutions depositors and customers.
Vietnam’s consumer finance market is high potentials with annual growth rate of over 50 percent and projected value of VND1,000 trillion (US$43.85 billion) by 2019.
According to estimates of the National Financial Supervisory Commission (NFSC), consumer lending in 2017 surged sharply by 65 percent compared to 50.2 percent in 2016. The proportion of consumer credit in total outstanding loan of the entire banking system was estimated at 18 percent in 2017, up from 12.3 percent in 2016. Of this, home loans accounted for 52.9 percent. Lending for home appliances and transport vehicles made up 15.3 percent and 8.3 percent, respectively.
Nguyen Van Thuy, deputy director of NFSC’s general supervisory division, attributed the sharp surge in consumer credit to a high demand for housing, arising from a young population and urbanization.
Besides this, a large portion of the population was gradually moving from cash payments to bank payments and were willing to borrow for their lifestyle needs, Thuy said.
The report also said the consumer credit market share of commercial banks increased from 39 percent in 2016 to 45.7 percent at the end of 2017, while the rates at joint stock commercial banks and financial companies decreased slightly from 47 percent in 2016 to 42 percent by end-2017.
Thuy said that the consumer credit would remain a potential and strategic area of credit institutions and was forecast to witness high growth next time.
Economist Le Xuan Nghia said consumer lending was a global trend, citing Europe as an example where consumer credit accounted for some 71 percent of total bank loans.
The proportion of consumer lending in Vietnam’s economy was lower than that of other countries with medium income. Vietnam’s consumer loan was 18 percent against 30 percent in other countries.
Value of Vietnam’s consumer finance market is forecast at US$43.85 billion by 2019
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The SBV also ordered credit institutions to tighten credit control, by making timely malpractice detection and strictly handling violations of consumer lending regulations to protect customers’ interests.
Regarding specialized consumer finance companies, the SBV is working on promulgating more in-depth regulations on uniform loan interest rates across the entire market to prevent fraudulent lending.
The move was made after the Department of Competition and Consumer Protection under the Ministry of Industry and Trade said it received many complaints from consumers related to the well-known consumer lender FE Credit.
The complaints focused primarily on malpractice in FE Credit’s customer service, such as shady loan transactions and verbal harassment towards consumers from staff working in the debt recovery department in 2017 and the first quarter of 2018.
The SBV’s Banking Supervision Agency (BSA) announced that it will make an annual inspection on FE Credit this year. The inspection is a periodic plan already announced by the SBV at the end of 2017, ensuring financial protection for credit institutions depositors and customers.
Vietnam’s consumer finance market is high potentials with annual growth rate of over 50 percent and projected value of VND1,000 trillion (US$43.85 billion) by 2019.
According to estimates of the National Financial Supervisory Commission (NFSC), consumer lending in 2017 surged sharply by 65 percent compared to 50.2 percent in 2016. The proportion of consumer credit in total outstanding loan of the entire banking system was estimated at 18 percent in 2017, up from 12.3 percent in 2016. Of this, home loans accounted for 52.9 percent. Lending for home appliances and transport vehicles made up 15.3 percent and 8.3 percent, respectively.
Nguyen Van Thuy, deputy director of NFSC’s general supervisory division, attributed the sharp surge in consumer credit to a high demand for housing, arising from a young population and urbanization.
Besides this, a large portion of the population was gradually moving from cash payments to bank payments and were willing to borrow for their lifestyle needs, Thuy said.
The report also said the consumer credit market share of commercial banks increased from 39 percent in 2016 to 45.7 percent at the end of 2017, while the rates at joint stock commercial banks and financial companies decreased slightly from 47 percent in 2016 to 42 percent by end-2017.
Thuy said that the consumer credit would remain a potential and strategic area of credit institutions and was forecast to witness high growth next time.
Economist Le Xuan Nghia said consumer lending was a global trend, citing Europe as an example where consumer credit accounted for some 71 percent of total bank loans.
The proportion of consumer lending in Vietnam’s economy was lower than that of other countries with medium income. Vietnam’s consumer loan was 18 percent against 30 percent in other countries.
