Banks to promote online lending through national population database access

Access to this huge amount of customer data is a golden opportunity for banks to promote digital services and products, especially online lending. (Photo baodautu.vn)

Hanoi - Through a series of newly-issued regulations and access to the national population database, banks are planning to expand their online money-lending services.

Deputy Governor of the State Bank of Vietnam (SBV) Pham Tien Dung said accessing the national population database will help banks to check and authenticate new customer information more easily.

Commercial banks will promote lending services on their electronic platforms based on this database.

The draft amending the Law on Credit Institutions has many regulations specifying banking services via electronic devices.

Besides that, several provisions supplemented by the Civil Law and the Law on Electronic Transactions are necessary to complete the legal framework for online lending.

Online lending, mostly small loans, has been implemented by many banks for a long time. However, this lending form has not been specified in the law. So many banks have carried out online lending with fear that the lending contract will be declared invalid in the case having a legal dispute.

In addition, due to a large amount of junk data and virtual accounts, banks are not interested in promoting online lending because of having many risks.

Since the national population database was formed, the SBV has coordinated with the Ministry of Public Security to verify 25 million customers in the credit information database and focuses on verifying the remaining 26 million customers within the next few months.

Owning this huge amount of clean customer data is a golden opportunity for banks to promote digital services and products, especially online lending.

Allowing the banks to access the population database together with completing the legal framework on digital banking is an opportunity for the banking industry to grow strongly in the future. A solid legal corridor and clean database are the foundation to move towards all banks operating in the digital environment, said economist Le Xuan Nghia.

Nguyen Thi Kim Oanh, Vietcombank Deputy General Director, said the development of online lending would solve the needs of people and banks.

In the past, the banks were still cautious of online lending because the customer database still had junk information and was not authenticated.

The other problem is the automatic credit appraisal and approval due to data limitations and unclear legal basis. One more thing is to lack of customer information to collect debts.

But accessing the national population database and applying the automatic appraisal and approval mechanism is a good opportunity for State-owned joint-stock commercial banks to solve those problems, helping inpiduals easily get online banking loans with reasonable interest rates, Oanh told Đau tu (Investment) newspaper.

A representative of Techcombank said in the past, the traditional lending process was often carried out through many steps, spending a lot of time and human resources. Now, thanks to the bank's large data on customers and the national population database, the bank hopes to improve the speed of processing lending procedures and enhance risk management.

Several banks have coordinated with the Police Department for Administrative Management of Social Order (C06) under the Ministry of Public Security to start testing a citizen credit scoring system based on population data.

The banks will initially provide unsecured loans for small loans based on the citizen credit scoring system. This solution will promote the retail lending of the banks.

According to a leader of the Bank for Investment and Development of Vietnam (BIDV), the central bank must have official regulations on implementing this solution.

In addition, Oanh from Vietcombank said the Ministry of Public Security needs to update population data promptly to ensure a smooth connection between the banking system with VNeID - the electronic identification application and the citizen credit scoring system not to affect the customer's experience.

According to Oanh, the SBV and other State management agencies must also adjust relevant legal provisions to create favourable conditions for providing loans in the digital environment.

Ngo Minh Sang, director of inpidual clients at Viet Capital Bank, said that the legal documents have not kept up with the changes in the market, so it is necessary to change the legal documents soon and to synchronise data.

For example, the tax code is managed by the tax authority, while the bank manages the credit information. The national data must synchronise the information.

Financial institutions’ role in lending to domestic banks The Vietnamese banking system has had to contend with a myriad of internal and external factors in 2022. Andrew Jeffries, country director of the Asian Development Bank in Vietnam, told VIR’s Hong Dung about the current liquidity situation and explained how businesses can access loans from major financial institutions.

Businesses hoping for flexibility with lending conditions Businesses are still up against it when it comes to applying for bank loans, even though Vietnam’s central bank has cut interest rates several times already this year.

How bad debts influence lending rates Last week the State Bank of Vietnam continued reducing diverse regulatory interest rates in a bid to help remove impediments for borrowers, as well as support credit institution efforts to drive down input costs, and from there be able to reduce lending rates.