A bank teller counts cash at a transaction office in Hanoi. (Photo: VNA) The State Bank of Vietnam's Circular No 06/2023/TT-NHNN,effective from September 1 this year, enables borrowers to secure loansfrom alternative banks to settle their outstanding loans at their originalbank.
Since the introduction of this lending policy, banks have offeredappealing interest rates, as low as 6-7% per annum, to entice new clients.Nonetheless, borrowers have reported difficulties in moving their current debtsto a different bank to benefit from reduced interest rates.
A borrower said he was especially interested in this new lendingpolicy as he had borrowed nearly 2 billion VND from a bank three years ago tobuy an apartment and the interest rate of the loan is currently more than 14%per year. He therefore hoped to get a new loan from another bank that isintroducing a low interest rate of 6-7%.
However, after working with the new bank, he discovered the lowrate is only applied during the preferential period of 24 months at most. Sincehe borrowed three years ago, the preferential period had expired. Therefore,even if he transfers the debt to the new bank, they will apply a floating interestrate of around more than 10% per year. If calculated carefully, the totalamount he would have to pay is almost the same at both banks. Besides theinterest rate, he would also need to pay other fees such as an early repaymentfine and appraisal fee to transfer the loan to the new bank.
Another borrower also learned about the new lending policy andfound it was infeasible for her family to benefit from the policy. Sheexplained that if she wants to transfer her loan to a new bank to enjoy thelower interest rate, she would need to pay off the loan at the old bank,satisfy the mortgage, and then remortgage the asset to secure a loan at the newbank. Alternatively, she could use another asset as collateral for a loan atthe new bank. However, the borrower said both measures are not feasible for herfamily because she cannot borrow enough to pay off the old debt and release thecollateral, nor remortgage with a new asset.
Finance expert Dinh Trong Thinh said that in theory, the newlending policy provides borrowers with more flexible options. For instance, ifthey find another bank offering better incentives or lower interest rates forloans, they can opt to borrow from that bank to repay their current loan at theoriginal bank. This forces banks to compete fairly, equitably and healthily inthe loan market. However, most large loans at banks require collateral. Thus,it is challenging for borrowers to prepay their debts at one bank and havecollateral to borrow from another.
Thinh proposed that the State Bank of Vietnam allow commercialbanks to lend based on the existing collateral. He explained that asinformation about loans and collateral is available at the information centreof the banking system, banks can facilitate conditions for borrowers totransfer debts from one bank to another without having to satisfy the mortgagefrom the old bank.
The new bank can use the available information about collateral atthe old bank to re-evaluate and approve loan applications, instead of requiringcustomers to remortgage another asset or satisfy the mortgage at the old bank.This would make it easier for borrowers to access new loan sources, and bankswould also become more competitive, Thinh said./.
VNA
