Can customers bargain on loan interest rates?

According to Circular 39/2016/TT-NHNN, from March 15, 2017, lending interest rates will be applied according to the agreement mechanism. This means that borrowers have the right to "bargain" with banks when borrowing money. However, there are still many concerns about this issue.

Get to “bargain” with the bank

With this circular, customers will be free to negotiate loan interest rates based on supply and demand, loan needs and creditworthiness of customers. In other words, customers have the right to "bargain" on interest rates with banks when borrowing.

According to Circular 39/2016/TT-NHNN, from March 15, 2017, lending interest rates will be applied according to the agreement mechanism.

It can be said that this is a new and breakthrough point implemented in accordance with market rules. This regulation has clearly distinguished between bank loans and civil loans. The restoration of revolving loans is necessary, bringing many benefits to enterprises, people, banks and the whole economy. Experts affirm that the issuance of this circular is a decision suitable to the current economic context.

Interest rate agreements do not apply to short-term lending in five sectors: Agricultural and rural development; export business; small and medium enterprises; supporting industries and high-tech application sectors. The maximum lending interest rates for these five sectors are decided by the Governor of the State Bank of Vietnam (SBV) in each period. In addition, Circular 39 has restored revolving lending activities that were previously suspended.

To tighten management of finance companies, the State Bank also issued Circular No. 43/2016/TT-NHNN regulating consumer lending by finance companies. Specifically, this Circular stipulates that credit institutions are responsible for providing customers with full information before establishing a loan agreement such as loan interest rates, time of determining loan interest rates, interest rates applied to overdue principal balances, interest rates applied to late payment interest, loan interest calculation methods, etc.

Regarding consumer loan interest rates, finance companies must issue regulations on consumer loan interest rate frameworks that are applied uniformly throughout the system in each period and include the highest and lowest loan interest rates for each consumer loan product.

Still have many concerns

Many enterprises believe that Circular 39 will help enterprises proactively develop business plans in a market-based manner. This means that if an enterprise has a good business plan, it will be able to borrow at a low interest rate, and if the plan is ineffective, it will have to accept a higher interest rate.

Ms. Van Anh, Director of Linh Anh Company Limited, said: “This Circular creates an open, fair and equitable business environment. When borrowing from banks, if businesses have a good debt repayment plan and high collateral, they can “bargain” with banks to get the best interest rate so that both parties benefit.”

Contrary to the above opinions, many people are concerned about the recurrence of the medium and long-term interest rate race and that businesses will not be protected by the interest rate ceiling. Many people suspect that if not controlled, there will be a race to mobilize savings interest rates, making it difficult to achieve the goal of stabilizing interest rates.

Not only will the deposit interest rate be passive, but the lending interest rate will also be adjusted accordingly. Other loans will be allowed to float, pushing up the lending interest rate level, especially in the context that credit serving credit growth still comes from the banking sector.

To keep interest rates stable, the State Bank needs to have a mechanism for inspection, supervision as well as public and transparent information about banks.

Economists say that, in theory, removing the ceiling on interest rates in lending activities is in line with general requirements, stemming from market realities. However, that is only reasonable in cases where lending activities are conducted normally and equally among businesses.

Therefore, to keep interest rates stable, the State Bank needs to have a mechanism for inspection, supervision as well as public and transparent information about banks.

Economist Nguyen Tri Hieu commented that interest rates are assessed according to market supply and demand, reflecting the operation of the market. Therefore, floating interest rates can push interest rates up very high, making it impossible for many economic sectors to borrow because the borrowing costs are too high. However, when interest rates drop too low, people and businesses rush to borrow, leading to the risk of increased inflation. Therefore, there needs to be regulation by the State.

According to VOV