Banks prohibited from disbursing loans in cash

Monday, Apr 02, 2018 16:13

Banks will have to provide loans to bank accounts of beneficiaries via non-cash payment instruments. — Photo vietnamfinance.vn

The State Bank of Viet Nam has tightened lending regulations, prohibiting credit institutions and foreign bank branches from disbursing loans in cash, effective from April 2, 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, lenders will have to provide 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, seeking to have them comply with the stated purposes for requested loans. The disbursement of loans through bank accounts will help commercial banks supervise the use of borrowers’ loans from the beginning to avoid funds being used for incorrect purposes, such as rollovers, resulting in an increase of non-performing loans.

Under the new circular, lenders must disburse loans to a borrower’s bank account if it is required by law that money is to be transferred from the borrower’s bank account, and only in compliance with the purpose of the loans.

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 the purpose of a loan.

However, lenders may consider disbursing loans to the borrower in cash if the beneficiary does not have a bank account at any bank; or the borrower does not have a bank account at any bank and has made payments in connection with business plans approved by 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 a State-owned organisation and allowed to use cash in payments. — VNS

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