The disbursement by a commercial bank into a customer's account to pay for consumer expenses does not fall under the category of lending for deposits...
This is one of the responses of the State Bank regarding the implementation of Circular 06/2023/TT-NHNN amending and supplementing a number of articles of Circular 39/2016/TT-NHNN regulating lending activities of credit institutions and foreign bank branches to customers.
Regarding capital needs that are not allowed to be lent, in the case of a customer borrowing to buy a house, does a credit institution or a foreign bank branch (hereinafter referred to as a credit institution) disburse the loan capital and freeze the disbursed amount until the customer completes the home purchase procedure, is this considered a case of lending for deposit? According to the State Bank, this case is not lending for deposit.
State Bank speaks out about unfunded capital needs – Photo 1.
State Bank provides more information about regulations on not being allowed to borrow capital from credit institutions
Are credit institutions not allowed to lend money for deposits in any form, including deposit certificates issued by credit institutions or foreign bank branches?
According to the provisions of Clause 7, Article 8 of Circular No. 39/2016/TT-NHNN (as amended and supplemented), credit institutions are not allowed to lend capital for the purpose of depositing money. According to the provisions of Clause 13, Article 4 of the Law on Credit Institutions (as amended and supplemented), receiving deposits is the activity of receiving money from organizations and individuals in the form of demand deposits, term deposits, savings deposits, issuance of deposit certificates, promissory notes, treasury bills and other forms of receiving deposits on the principle of fully repaying the principal and interest to the depositor according to the agreement.
“Accordingly, credit institutions are not allowed to lend capital for the purpose of purchasing deposit certificates issued by the lending credit institution itself or by another credit institution,” the State Bank stated.
So, when a credit institution disburses money into a customer's payment account to pay for consumer expenses, is it considered a loan to deposit money?
The State Bank said that according to the provisions of Circular No. 39, credit institutions are allowed to consider and decide to lend money to pay for living expenses for customers. The credit institution's disbursement into the customer's payment account for customers to pay for living expenses is one of the methods of disbursing loan capital and is in accordance with the provisions of Circular No. 39 and Circular No. 21/2017/TT-NHNN. Therefore, the above case is not a loan for deposit.
It is known that Circular 06 (effective from September 1) of the State Bank has added many regulations on lending, including regulations that credit institutions are not allowed to lend money for deposits in order to control loan risks and lend for the right purpose.
However, the above regulation still has many concerns from credit institutions during the implementation process, so the State Bank has provided more information on the questions to ensure consistency throughout the system.
