Decentralization of credit institutions with mass withdrawals
The State Bank of Vietnam (SBV) has just issued a document explaining and accepting the opinions of 20 credit institutions (CIs) and the People's Credit Fund Association on the draft Circular regulating special lending.
This document was issued in the context of the new Law on CIs (amended) taking effect, with many important changes to the special lending mechanism. Most notably, the special lending interest rate of the SBV is adjusted to 0%/year and the decision-making authority is transferred from the Prime Minister to the SBV.
One of the most important contents explained by the SBV is the cases where credit institutions are granted access to this special loan of 0%.
Accordingly, the draft Circular stipulates that the SBV will provide special loans (interest rate 0%) to TCTDs that have suffered mass withdrawals and are under special control. The SBV affirmed that this regulation is "appropriate, strictly ensured, avoiding arbitrary application".
In cases where TCTDs are also subject to mass withdrawals but are not under special control, TCTDs will still be supported by the State Bank for liquidity. However, the support will go through other channels such as open market operations, refinancing, etc. These channels "have interest rates and/or assets that ensure little risk for the SBV".
Increasing the responsibility of credit institutions
Explaining this diversion, the SBV said that this helps to divide credit institutions to a serious level.
This measure is also expected to "reduc the risk for the SBV". At the same time, this contributes to promoting credit institutions to increase their responsibility in limiting violations or having to make efforts to overcome the situation of mass withdrawals, instead of "every time a large amount of money is withdrawn, they are entitled to a special loan from the State Bank at an interest rate of 0%/year".
Responding to VietABank's opinion on the need for clear criteria for "mass withdrawals", the SBV said that this content has been stipulated in the Law on CIs in 2024, so the draft Circular does not need further explanation.
Other opinions of the bank
The draft also received many opinions on the time and processing process.
Regarding processing time: Some credit institutions such as the microfinance institution of love (TYM) and BIDV believe that the time limit for the SBV to consider a special loan decision (maximum 20 working days) is too long compared to the urgency of mass withdrawals. The SBV responded that this is the maximum time, in fact, "depending on the situation, the units can speed up the processing progress".
Loan term: Regarding the loan amount (draft proposed based on payment needs within 07 days), banks have different opinions. BIDV and Agribank proposed to increase to 30 days or 10 working days, while VikkiBank proposed to withdraw to 05 days.
SBV Rejectes Proposal to Use Customer Deposits as Guarantee Assets
The microfinance and Tourism Organization (TYM) said that the characteristic of microfinance institutions is that they hardly hold valuable documents or large assets, so it will be difficult to qualify for mortgages to borrow special loans.
From that reality, TYM proposed a Circular to add a separate clause, allowing microfinance institutions to use specific assets as collateral. The proposed assets include "Micro-customer deposits" and "Mustful savings at TCVM organizations".
However, the State Bank did not accept this proposal.
In the explanatory document, the SBV clearly stated the viewpoint: "Customer deposits at TCTD are the property of customers (corresponding to the payment obligations of TCTD)".
Therefore, the management agency affirmed that the credit institution "cannot be used as a commercial facility for a special loan from the State Bank".
