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High risks in consumer lending   2009-03-17 - VNN

Banks now are loosening and marketing consumer lending with a high limit, long lending time, and preferential interest rates.


From the lending limit of 20 million dong without collaterals, banks raised to some hundreds of millions of dong per borrowing application. The minimum salary passing the lending requirement is lowered to two million dong a month with the appraisal time of 1-2 days only.

Leading the market in terms of consumer lending limit is South-eastern Asia Commercial Joint Stock Bank (SeABank) with one billion dong, followed by LienVietBank and Eximbank with 500 million dong each application.

The highest lending limit of around 200-500 million dong was provided by OceanBank, SHB, ACB, VIB Bank and ABBank with easy lending requirements.

Most recently, Eastern Asia Commercial Joint Stock Bank or EAB launched the 24-minute lending programme to meet the urgent capital demand with an interest rate of 1.07% a month.

Similarly, Eximbank lent loans with saving book mortgage within only on hour and with property assets within two days while newly established lender TienPhongBank also provided loans within 60 minutes by receiving with saving book or listed securities mortgage within four hours, and valuable paper mortgage within 30 minutes.

Even An Binh Bank attracted customers by offering loans enclosed with insurance and gold present.

According to Nguyen Thi Kim Xuyen, deputy general director of EAB, right after launching the preferential lending programme, the number of customers asking borrowing terms at the bank was increasing considerably.

But factually, banks all offered the too high lending limit so the soft loans still is far from the reach of borrowers.

One individual living in HCM City questioned capital borrowing procedures to repair house at SeABank and was heard about that the lender's consumer loans with secured assets carry an interest rate of 14% per annum. Yet, SeABank's mortgage consumer lending limit was up to 500 million dong equalling to 18 salaries of a five million dong monthly income earner, which exceeded her payment ability.

After that, she came to HSBC as being heard about an attractive lending rate of 12% pa, however, actually the foreign bank provides loan at flat interest rate (meaning that lending rate will be calculated based on initial outstanding debt).

All banks factually required collaterals in consumer lending to minimise risks. As for mortgage lending alone, the lending ratio accounts for 5-10% of total outstanding loans of individual customers. Typically, the mortgage-lending ratio of ABBank is below 2%.

Many people received awareness that borrowing bank loans at the moment meant keeping debts in many following years.

The aforementioned individual decided to halt seeking lending requirements at banks. If she borrows 200 million dong, her two-member family with total monthly income of six million dong will have to pay six million dong a month for both principal and interest while they have to spend on sickness, accident, daily expenses and family affairs. Meanwhile, the lending rate could surge again.



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