They have begun to do this since the State Bank of Vietnam announced it would take inspection tours to examine the credit quality and outstanding loan growth rates at some banks which have been considered as growing too rapidly.

No more unsecured credit

Unlike the beginning of the year, many commercial banks now have become hesitant with consumer credit, especially credit with no collateral. Asia Commercial Bank (ACB) has recently set the new condition o­n those who want loans but do not have collateral that they cannot live in leased houses. The provision also applies to those who own houses but lease the houses to others and then rent houses to live in.

ACB’s credit officer said that previously, the bank o­nly required borrowers to show ‘ho khau’ (permanent residential registration book), have the monthly income of 5 million dong per month, have a stable job (for more than o­ne year) and a fixed telephone line. However, as more and more clients have been seeking unsecured credit, the bank has set more conditions to ‘filter’ clients and reduce risks.

Techcombank stopped providing loans with no collateral in May.

The general director of a big joint-stock bank admitted: “Banks’ credit policies have seen some changes”.

The personal banking director of another bank said that his bank does not intend to expand unsecured credit for many reasons, including high risks and difficulties in loan management. The bank has raised the minimum income level borrowers need to have to be eligible for loans to 5 million dong from 3 million dong.

Meanwhile, other banks maintain consumer loaning with easy conditions, but require high interest rates. Prudential Finance, for example, is providing loans with no mortgaged assets required at 17.4 percent per annum.

Secured loans expanded

After the State Bank announced its detailed plan o­n inspecting banks’ credit, commercial banks have reduced the scale of unsecured loans, but have been trying to push up mortgaged loans.

A series of promotion programmes have been launched by banks recently, inviting people to seek loans to purchase houses. Many banks have raised loan limits to 90 percent of a piece of real estate’s value instead of 70 percent with the grace period of 36 months. Some banks have officially stated that they will disburse money within 48 hours of customers completing loan applications.

A lot of banks are considering loans to fund house purchases as their key product. This kind of loaning is considered consumer credit, which means that negotiation-based interest rates are applied to the loans (banks do not have to apply the ceiling interest rate in consumer loans).

The director of a bank said that the deposit interest rate has reached 8.26 percent per annum o­n average, while lending rate is 10.26 percent at maximum. With such a narrow gap between deposit and lending rates, banks’ profit will become smaller if they do not expand consumer credit.

Funding house purchases proves to be a reasonable move by banks at this moment, especially as the real estate market has warmed up. A lot of securities investors, who have gained big money from the stock market, have been seeking to buy houses.

Regarding lending interest rates, ACB is lending at 12.75 percent, Techcombank 12.9 percent, OCB and BIDV 13-14 percent and Eximbank 10.5 percent.

SBV promises to keep tight control

In the meeting with local press agencies in HCM City in late June, Governor of the State Bank of Vietnam Nguyen Van Giau stated that the central bank will tighten control over consumer loaning.

Consumer loans had reached 85 trillion dong by the end of May, an increase of 11.6 percent over the beginning of the year. The growth rate proves to be lower than the average credit growth rate of the whole banking system. However, if banks do not take necessary measures to control credit, this may lead to the problem that clients mortgage houses to borrow money to purchase stocks, and then mortgage stocks at banks to borrow money. This would be risky for banks and the national economy as well.

Since the central bank announced it would be looking into the situation, the cash flow to the stock market has been slowing down. In recent trading sessions, the trading values of both bourses were just 1,500 billion dong for each trading session.