A bank worker with a customer at a VietinBank's office in Hà Nội. — VNA/VNS Photo
Having fewer regulations for personal loans under VNĐ100 million doesn't mean the approval process will be easier, said policymakers and industry experts.
Borrowers of less than VND100 million do not need to provide a feasibility plan to repay as the banks only require their financial records and the intended use for the money.
The more streamlined process was designed to help boost national spending by making personal loans more accessible to the public, said industry experts. Commercial banks have implemented reforms to speed up the development of additional consumer digital products.
"The loan approval process will remain as strict as usual. Our policy changes should only be interpreted as a move to align with the economy's need to promote consumer finance in the coming period," said SBV's deputy governor Đào Minh Tú.
Early customer feedback indicated difficulties still remained for borrowers.
Nguyễn Mai Hương, a resident of Hà Nội said she needed a small loan to purchase a motorbike recently, said the process was still rather inconvenient. She said the banks asked for a lot of information, including her ability to repay, and her residence. Some banks asked for the information of a co-borrower.
"The bank required me to submit a six-month salary record along with an employment contract but my husband and I are freelancers without fixed salaries or employment contracts. Additionally, the bank asked me to provide photocopies of my ID card, marriage certificate, and the co-borrower information, including name, date of birth, ID card, and workplace," Hương said.
All that for a loan at 10.5 per cent interest a year, which according to her, wasn't as low as she had hoped. Hương later decided it wasn't worth the hassle and went with a consumer finance company.
She said it took about 12 hours before she received the money.
"They only needed my ID, utility bills and insurance number. While their rate was a bit higher than the bank's the painless process was worth the money," she said.
A banking industry representative said the banks want a process as simple as possible for small personal loans but customers must, one way or another, be able to prove they can repay the loans.
"We must ensure the loans can be recovered because we are responsible for our depositors' money, which we also have to pay interest on. That's why it should not be easy to secure a loan," he said.
According to a report by the Vietnam Banks Association (VNBA), bad debt at many consumer finance companies and some banks has been approaching alarming levels.
The report also showed the risk in consumer credit was quite significant. Consumer loans' bad debt ratio at the end of 2023 was 3.8 per cent, increasing to over 4 per cent by the first quarter of 2024. Bad debt at finance companies at the end of 2023 was 15 per cent, and by the first quarter of this year, it was about 14.63 per cent.
By the end of June 2024, the system's bad debt ratio was 4.56 per cent. The total bad debt and potential bad debt in the system accounted for 6.44 per cent of total outstanding loans.
Collecting personal loans has always been a challenge despite efforts by the banking industry and the authorities.
"Two things are for sure. Banks will not make it easy to get a loan because they must ensure safety. Interest for unsecured personal loans will always be higher than business loans or loans backed up with collaterals," said Nguyễn Quốc Hùng, VNBA's vice chairman and secretary-general. — VNS