Việt Nam Banking Association has proposed consumer lending limit of finance companies from VNĐ100 million (US$3,800) to VNĐ300-400 million in an effort to expand consumer credit.
The proposal was raised in a document sent to the State Bank of Vietnam proposing measures to remove difficulties in the implementation of consumer credit regulations.
The three major issues which needed to be addressed include the lending limit for finance companies, the direct disbursement ratio and the minimum consumer lending ratio, the association said.
The current lending cap at VNĐ100 million is outdated and hampered competitiveness because it restricts finance companies to small and short-term loans and causes difficulties in developing new lending products.
The proposed limit is equivalent to unsecured lending thresholds for agriculture and rural development as well as transactions subject to anti-money laundering reporting.
Raising the limit could help expand consumer credit, meet borrowing demand and enable finance companies to cut costs, reduce interest rates and improve debt quality.
Currently, SBV requires finance companies to maintain at least 70 per cent of their total loans in consumer credit, which was no longer appropriate given growing competition from banks, credit institutions and peer-to-peer lending platforms, the association said.
With P2P lending being trial, the association urged more operational flexibility for finance companies to ensure a fair playing ground.
The Association proposed lowering the minimum consumer lending ratio to 50 per cent or replacing it with indicators such as capital adequacy, liquidity, non-performing loans and credit limits.