The warning was issued after several banks in the country offered this type of loans to customers, a local media report said. However, customers failed to present capital use schemes that is required according to a State Bank of Vietnam circular.

Banking expert Nguyễn Trí Hieu told the local media that, “This form of lending is called ‘phantom loan’ and many developed countries in the world forbid such loans as it could distort total assets of bank.”

Customers who have long-term savings books often request this type of loans because it allows them to maintain their accounts until the maturity date. This way, they will continue to earn high interest rates for the savings — in case they require capital before the maturity date. 

According to the terms of the State Bank of Vietnam, savings accounts that close before the maturity date will receive below 1 percent interest rate, similar to demand savings. For long-term savings, the interest rates are much higher ranging between 7 percent and 8 percent annually depending on the bank. 

The State Bank of Vietnam’s notice clearly stated that local commercial banks not adhering to the rules will face serious consequences. It wants financial institutions in the country to abandon unhealthy practices that might hurt the monetary market in the long run. 

Earlier this month, the central bank announced that the official interest rates will be reduced to 6 percent annually from the current 6.25 percent. It also emphasised on the fact that Vietnam’s inflation rate is under control and the monetary and foreign exchange markets will stabilise. 

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Now in its second year, the summit is organized by the Citi Foundation and the Foundation for Development Cooperation (FDC) in partnership with the Banking with the Poor Network and The Economist Group. This year, the State Bank of Vietnam is the official host of the summit.

Themed ‘Advancing Financial Inclusion in a Digital Age’, the summit will explore the opportunities and challenges of the next generation of financial inclusion, and showcase the latest technology and innovations in financial products and services for the unbanked and underserved.

Michelle Curry, CEO of FDC, called the impact of the digital age on financial inclusion ‘arguably the greatest financial reform of our time’ and added that it was ‘both encouraging and inspiring to see such dedication to the reform evidenced by the large number of attendees at this sellout summit’.

Plenary Panel Discussion – Ms. Brandee McHale, Mr. Dean Karlan, Mr. Gregory Chen and Ms. Vijayalakshmi Das discuss The Changing Landscape in Asia-Pacific

                                   Stephen Taylor, Deputy Chairman, Foundation for Development Cooperation

                              Ms. Michelle Curry, Chief Executive Officer, Foundation for Development Cooperation

                          Ms. Brandee McHale, President of the Citi Foundation and Director of Corporate Citizenship at Citi

Madam Nguyen Thi Hong, Deputy Governor of the State Bank of Vietnam, spoke about the future of financial inclusion in her keynote address. “More organisations are offering new financial products and services that change the form and nature of the market and are shaping the future of financial inclusion. This rapid change presents challenges in terms of management, monitoring and risk of information and system security. Therefore, it is critical to harmonise the goals of financial innovation, integration and consumer protection to maximize the benefits of financial inclusion,” said Madam Hong.

Despite great progress made over the past decades in financial inclusion worldwide, some two billion adults remain unbanked, more than half of which are in Asia Pacific.

“The inclusive finance ecosystem is evolving to include not only financial service providers, both banks and non-banks, but new players, like mobile money providers and e-money operators, to name a few,” said Brandee McHale, President of the Citi Foundation and Director of Corporate Citizenship at Citi. “What we will explore at this year’s Summit is the need to balance new innovative technological advances and creative partnerships with policy that will continue to not only help drive financial inclusion for low-income populations but also protect vulnerable populations.”

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