Can customers negotiate loan interest rates?

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

Being able to "negotiate" with the bank.

With this circular, customers will be free to negotiate loan interest rates based on supply and demand, borrowing needs, and creditworthiness. 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 based on a negotiated mechanism.

It can be said that this is a new and groundbreaking development implemented in accordance with market principles. This regulation clearly distinguishes between bank loans and private loans. The restoration of revolving loans is necessary and brings many benefits to businesses, individuals, banks, and the economy as a whole. Experts affirm that the issuance of this circular is a decision appropriate to the current economic context.

Interest rate agreements do not apply to short-term loans for five sectors: agricultural and rural development; export businesses; small and medium-sized enterprises; supporting industries; and high-tech applications. The maximum lending interest rate for these five sectors is determined by the Governor of the State Bank of Vietnam (SBV) for each period. In addition, Circular 39 has restored revolving loan activities that had previously been suspended.

To tighten the management of finance companies, the State Bank of Vietnam 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 complete information before establishing a loan agreement, such as the loan interest rate, the time of determining the loan interest rate, the interest rate applied to overdue principal, the interest rate applied to late payment interest, the method of calculating loan interest, etc.

Regarding consumer loan interest rates, finance companies must issue regulations on a unified consumer loan interest rate framework applicable throughout the system for each period, including the highest and lowest interest rates for each consumer loan product.

There are still many concerns.

Many businesses believe that Circular 39 will help them proactively develop business plans based on supply and demand, following market mechanisms. This means that if a business has a good business plan, it will be able to borrow at a lower interest rate; if the plan is less effective, it will have to accept a higher interest rate.

Ms. Van Anh, Director of Linh Anh Co., Ltd., stated: “This circular creates a transparent, fair, and equitable business environment. When businesses borrow from banks, if they have a good repayment plan and high-value collateral, they can negotiate with the bank to get the best interest rate so that both sides benefit.”

In contrast to the above opinions, many people are concerned about the recurrence of a race to offer medium and long-term interest rates, and that businesses will not be protected by interest rate caps. Many fear that, if left unchecked, a race to attract high savings interest rates will ensue, making it difficult to achieve the goal of stabilizing interest rates.

Not only will deposit interest rates be subject to change, but lending interest rates will also be adjusted accordingly. Other loans that are allowed to float will push lending interest rates higher, especially in the context where credit for credit growth still comes from the banking sector.

To maintain interest rate stability, the State Bank of Vietnam needs a mechanism for inspection and supervision, as well as public and transparent information about banks.

Economists argue that, in theory, removing interest rate caps on lending is in line with general requirements and market realities. However, this is only reasonable if lending activities are conducted normally and equally among businesses.

Therefore, in order to maintain interest rate stability, the State Bank of Vietnam needs a mechanism for inspection and supervision, as well as public and transparent information about banks.

Economist Nguyen Tri Hieu commented that interest rates are determined by market supply and demand, reflecting market dynamics. Therefore, allowing interest rates to float freely could push them very high, making borrowing impossible for many economic sectors due to excessively high costs. Conversely, when interest rates fall too low, individuals and businesses rush to borrow, leading to increased inflation. Therefore, government regulation is necessary.

According to VOV