The State Bank of Vietnam (SBV) is advancing a proposal to significantly increase the limit for small-value consumer loans that do not require borrowers to provide financial proof. This move, part of a draft circular amending Circular 39 on lending activities by credit institutions, aims to better align with Vietnam's current economic landscape and evolving consumer needs.

Under the proposed changes, the definition of a small-value loan would expand. Currently, such loans are capped at 100 million dong. The new draft suggests raising this ceiling to 400 million dong for loans from credit institutions. For people's credit funds, a separate limit of 200 million dong is proposed, acknowledging their distinct operational scale and financial capacity.

A key feature of these small-value loans, as stipulated by the Law on Credit Institutions, is that credit institutions are not required to demand financial capability documents or feasible capital utilization plans from customers. This exemption simplifies the borrowing process for individuals seeking smaller amounts of credit.

Transaction office at a commercial bank. *Photo: Giang Huy*

Beyond the loan limit increase, the draft circular also addresses electronic lending. It proposes that credit institutions engaging in electronic lending will bear full responsibility and risk for these operations. They will also be permitted to independently establish specific outstanding loan limits for each customer. This flexibility responds to recommendations from credit institutions, who wish to set their own risk-based ceilings, leveraging their technological resources.

The SBV views these adjustments as reasonable and timely. The rising costs of living and goods mean that customer borrowing needs often exceed the current 100 million dong limit. The existing ceiling no longer fully meets the capital requirements of the public and is inconsistent with the rapid development of financial technology (fintech).

Expanding electronic lending services is considered an inevitable trend within the banking sector's digital transformation strategy. By removing the cap on online lending, the proposal aims to provide people with easier and more transparent access to credit through electronic channels, thereby helping to curb informal lending. This regulation will also benefit customers by reducing transaction costs, saving travel time, and increasing flexibility in accessing electronic loans.

Quynh Trang