Tiếng Việt
中文 (中国)
Circular No. 06/2023/TT-NHNN, which amends and supplements certain provisions of Circular No. 39/2016/TT-NHNN, has been recently issued by the State Bank of Vietnam. This new circular removes the limitation on borrowing for the purpose of prepaying existing loans at other banks solely for business-related activities. As a result, individuals can now get loans from other banks to prepay their outstanding loans related to various purposes, such as home mortgages, car loans, and personal expenses, at their original bank.
Clause 6, Article 8 of Circular No. 39 states that one of the ineligible purposes for lending includes borrowing to repay debts owed to other credit institutions and foreign loans, except in cases where: a) The loan serves business operations; b) The loan term does not exceed the remaining term of the old loan; c) The loan has not undergone a restructuring of its repayment term.
Circular No. 6 has removed the exclusion of “serving business operations” while retaining the two provisions regarding the loan term not exceeding the remaining term of the old loan and the loan being one that has not undergone a restructuring of its repayment term.
As of the effective date of Circular No. 6 (September 1, 2023), borrowers can seek loans from different banks to prepay their existing loans. This new regulation introduces necessary flexibility in the cash flow management strategy of borrowers.
Borrowers will have more flexible options. For instance, if they find another bank offering better incentives or lower interest rates for loans, they can choose to borrow from that bank to repay their current loan at the original bank. Currently, if borrowers wish to follow this approach, they need to provide additional collateral to the new bank to get a loan, then repay the old bank, and finally retrieve the previous collateral. This process requires borrowers to possess two equivalent collateral assets at the same time. Starting from September, borrowers will only need one asset to secure the prepayment loan.
However, it’s important to note that this borrowing mechanism does not imply that borrowers can obtain endless loans between different banks to repay their existing loans. The new bank will only allow borrowers to borrow for a term that matches the remaining term of the original loan, without extending it.
For example, a borrower has a loan of 1 billion VND from Bank A with a one-year repayment term. After nine months, the borrower utilizes the aforementioned mechanism to borrow an additional amount of more than 1 billion from Bank B to repay Bank A. As a result, the borrower becomes a debtor of Bank B with a new loan term. However, this new loan term must be under three months, as stipulated by “The loan term does not exceed the remaining term of the old loan.”
In conclusion, Circular No. 6 aims to expand the scope of borrowing purposes to include consumer spending, housing, vehicles, etc., rather than limiting it to business-related activities. The significance of this relaxation is to provide flexibility to borrowers without creating a loophole for unlimited borrowing.
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