Small-value loans are not required to prove the loan purposes under the law in Vietnam

Small-value loans are not required to prove the loan purposes under the law in Vietnam (Internet image)

On June 28, 2024, the Governor of the State Bank of Vietnam issued Circular 12/2024/TT-NHNN amending Circular 39/2016/TT-NHNN prescribing lending transactions of credit institutions and/or foreign bank branches with customers

What are small-value loans under the law in Vietnam?

Small-value loans include:

• Loans for personal needs, credit grants through the card of commercial banks, foreign bank branches;

• Financial leasing, consumer loans, credit grants through the card of non-bank credit institutions;

• Loans for personal needs from people's credit funds;

• Loans from microfinance institutions.

(Clause 2, Article 102 of the Law on Credit Institutions 2024)

Small-value loans are not required to prove the loan purposes under the law in Vietnam

According to Clause 7, Article 26 of Circular 39/2016/TT-NHNN (amended and supplemented in Circular 12/2024/TT-NHNN), credit institutions must request customers to provide documents, data proving feasible plans for the use of funds, financial capability of customers, and the lawful purpose of fund usage before deciding to lend, except for small-value loans.

For small-value loans, the credit institution must have at least information on the lawful purpose of fund usage and the financial capability of customers before deciding to lend.

Thus, according to regulations, small-value loans do not have to prove the plans for fund usage. However, customers must provide at least information about the lawful purpose of fund usage and financial capability.

Rejected loan demands in Vietnam

Credit institutions in Vietnam shall reject the following loan demands:

• To carry out business investment activities in sectors and industries banned by the Investment Law 2020.

• To pay expenses or meet financial needs for business investment activities in sectors and industries banned by the Investment Law 2020 and other transactions or acts prohibited by law.

• To purchase or use goods and services in sectors and industries banned by the Investment Law 2020.

• To buy gold bullion.

• To repay credit grants at the same lending credit institution, except for loans to pay interest arising during construction, where interest costs are included in the total investment approved by the competent authority in accordance with the law.

• To repay foreign loans (excluding foreign loans in the form of deferred payment for goods), credit grants at other credit institutions, except for loans to repay ahead of time the old loans that meet all of the following conditions:

  • The loan term does not exceed the remaining term of the previous loan;

  • The loan has not undergone any restructuring of repayment terms.

(Article 8 of Circular 39/2016/TT-NHNN (amended in Circular 06/2023/TT-NHNN))

Nguyen Ngoc Que Anh

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