Along with strictly controlling credit for stock and real estate investments, banks are tightening requirements on consumer unsecured loans in order to limit risk due to bad debts.
In order to secure loans from the Southeast Asia Bank (SeaBank) or the Lien Viet Joint Stock Commercial Bank (LienVietBank), customers must have an account at the bank and confirmation of income from their agencies.
The Asia Commercial Bank (ACB), for its part, has changed its policy from only requiring residence certificates and a stable monthly income averaging 5 million VND, to excluding those who rent but do not own their housing.
|A Techcombank building|
Worried about the risks and difficulties in customer management, some banks, including the Technological and Commercial Joint Stock Bank (Techcombank) and the Vietnam Export-Import Bank (Eximbank), have decided to stop extending unsecured loans or have narrowed the limits of consumer credit, along with shortening lending periods and selecting customers more carefully.
These moves by banks are aimed at implementing the State Bank’s policy to tighten consumer lending, which was issued after the debt balance of consumer loans in the first six months of the year increased 11.6 percent compared with the end of 2008, although the total debt incurred by such loans was a comparatively small amount.
According to Nguyen Duc Huong, LienVietBank General Director, consumer unsecured loans entail many risks due to having no guaranteed property, but it’s a market with great potential for financial companies and banks if carefully managed, especially when macro policies are aimed to accelerate economic development.
Sharing the same view with Huong, Tran Minh Khoa, Director in charge of Individual Customers at Eximbank said that in banking activities, the bank’s largest risk comes from unsecured loans, which are, in any case, always risky. It’s important for banks to have effective management measures to deal with such loans.