The State Bank of Vietnam is collecting opinions for a draft regulation which will only allow finance companies to offer personal loans to people with a good credit history as it seeks to reduce bad debts.

Besides, cash loans cannot exceed 30 percent of a company’s total loans if the regulation comes into effect, with consumer durable loans, credit card loans and others accounting for the lion’s share.

Analysts have expressed concern about some of the provisions. Ho Chi Minh City Securities Corporation (HSC) said in a note that most finance companies give personal loans to first-time debtors who have no credit history, and so the stipulation would cause their revenues to plummet.

All major finance companies have higher cash loan ratios than proposed by the SBV, it said, pointing out FE Credit tops with 80 percent followed by Home Credit with 50 percent and HD Saison with 40 percent.

"If the draft law is approved, Vietnam’s consumer lending industry will see apparent slower growth."

Echoing HSC, economist Can Van Luc said the cash loans ratio should be set at 40-50 percent to ensure finance companies have room to manuever.

"The SBV should have a timeline on the new ratio so that finance companies have time to meet the requirements," he told VnExpress International.

Experts have said that Vietnam's consumer lending has developed rapidly in recent years, and the market has vast room to grow. The share of consumer lending in Vietnam’s total outstanding loans is only about 11.4 percent, while the figure in developed countries is between 40-50 percent, Kalidas Ghose, CEO of  FE Credit, said earlier.