To support enterprises and borrowers affected by the Covid-19 pandemic, banks have simultaneously cut their interest rates by 0.5-2.5 percent per annum for loan packages.
The total capital of support packages has risen to above VND300 trillion.
Wave of interest rate cut
According to the State Bank of Vietnam (SBV), by May 8, the whole banking system has restructured the repayment terms for more than 215,000 customers with a total debt of VND130 trillion; exempted, reduced, and lowered interest rates for 260,000 customers with a total debt of more than VND1 quadrillion; provided new loans with preferential interest rates with accumulated turnover from January 23 the date Vietnam announced the Covid-19 pandemic to now reaching VND630 trillion.
More and more individual and corporate customers have received the interest rate cut policy. This is shown through the disbursement results of banks from the loan packages with preferential interest rates. Particularly, from the beginning of this year, BIDV has disbursed around VND35 trillion with annual interest rates from 6.5 percent, helping individual customers to maintain and expand production and business.
From January 23 to the end of March this year, State-owned Vietcombank had lent more than VND41.2 trillion to customers to maintain production and business and balance the cash flow. From the beginning of April to now, it continued to carry out the credit package of VND30 trillion with lending interest rates reducing by 2-2.5 percent compared to the current level for enterprises producing essential goods.
Moreover, from April 15, the lender has implemented the second phase of the support package and reduce the lending interest rate by 5-10 percent of the interest for customers affected directly by the Covid-19 pandemic. Thereby, 90,000 customers have enjoyed interest rate cut for the second phase with a credit scale of VND300 trillion, accounting for nearly 50 percent of existing debts at the bank.
Similarly, by May 4, VPBank has newly disbursed around VND18 trillion for 13,000 loan contracts with average interest rate declining by up to 3 percent compared to before the pandemic. The bank also reduced and extended debts for nearly 13,000 individual and household customers with total debts of VND4 trillion, accounting for more than 91 percent of the total files requested for support due to the pandemic.
The leader of the Vietnam National Coal and Mineral Industries Holding Corporation Limited said that currently, Vietcombank increases the company’s credit limit from VND3 trillion according to the plan to VND9 trillion. At the same time, the bank also reduces the interest rate to help the company to carry out its key and large projects. The timely financial aid has helped the company to overcome difficulties. Besides, the interest rate cut has also helped the company to lower its cost prices, thereby increasing the competitiveness of its products in the market.
Tung Lam Development Joint Stock Company also said that it invests and develops tourism services so it has been suffering great impacts caused by the pandemic. Its total revenue this year is expected to decline by 65 percent compared to that in 2019 and by 72 percent compared to this year’s plan as it had to close for the implementation of social distancing measures. The company invested nearly VND2.5 trillion in tourism and cable-car projects that were about to put into operations, but due to the pandemic, the company could not exploit these projects. Currently, the lender has reduced lending interest rates by 1.5 percent per annum for medium and long-term projects, at the same time, structured short-term and long-term principals and interests to help the company to ease pressure on interest expense and principal payment for loans due this year.
Not lowering lending standards
Although many enterprises need bank loans as their lifebuoys, banks affirmed that they would not lower lending standards. In HCM City, many enterprises, especially small and medium-sized enterprises, said that they hardly or even could not access bank loans.
Regarding this, Nguyen Hoang Minh, deputy director of the SBV-HCM City Branch, said that in the first four months of this year, the city’s credit growth was 2.4 percent, double that of the whole country. However, the room for credit growth this year remains large due to the plan of 14 percent of credit growth, which means there are up to 11.5 percent left or VND300 trillion, so there will be no capital shortage for the economy.
Therefore, Nguyen Hoang Minh affirmed that it is not that banks do not give loans to enterprises but whether enterprises are qualified to borrow money from banks or not because SMEs usually do not have collaterals. These enterprises can contact the Credit Guarantee for Small and Medium Enterprises Fund in HCM City for loan guarantees.
Regarding the fact that many enterprises proposed that there should be a new set of lending standards to suit the current situation, Nguyen Hoang Minh said that this proposal is a way to lower the credit standards. The Governor of the SBV affirmed that banks will not lower the credit standards when providing new loans because it might create more bad debts and affect the micro-economy.
As for commercial banks, according to Hoang Minh Hoan, deputy CEO of SCB, said that due to the impacts of the Covid-19 pandemic, business results of enterprises have suffered a slump, so enterprises that are in a credit relationship with the bank, besides being extended debts, the bank can loosen its lending limits as it has understood the business characteristics of its customers. However, for new customers, the first condition is that their financial statements must be reliable and audited by an independent auditing company.
The bank always has a policy for unsecured loans but enterprises must operate efficiently and provide transparent information for the bank to approve loans. However, Hoan also said that if enterprises are guaranteed by the Credit Guarantee for Small and Medium Enterprises Fund, it will be easier for the bank to provide credit.
Le Minh Hung, Governor of the State Bank of Vietnam:
The SBV will consider extending the time for debt structuring
‘Credit support is necessary, but commercial banks are not allowed to loosen credit standards and internal regulations of the banking system. Because the prerequisite is to ensure capital adequacy and safety for banking operations, not only for this period but for many years to come. A safe and healthy banking system will ensure support for the economy. The State Bank will consider the policy to extend the time for debt restructuring if necessary. The SBV will also set up task forces in provinces to grasp the situation of the implementation of measures of the banking sector to promptly handle arising problems. The whole banking system is committed to continuing to accompany the business community to overcome difficulties, promote production and business activities, and contribute to achieving the growth target under the government’s direction.’
Nguyen Hoang Minh, deputy director of the State Bank of Vietnam HCM City Branch:
Enterprises must publicly disclose transparent cash flow
Although many commercial banks have reduced lending rates for enterprises in the tourism industry, now many travel companies in HCM City still have difficulties in accessing the source of capital. To find solutions to support tourism companies, the SBV-HCM City Branch worked with the city’s Department of Tourism and received the general information that these companies have no assets but brands. Therefore, the banking industry will include travel companies in a programme to connect and support tourism enterprises. However, to be able to access credit, these travel enterprises must create conditions for the bank to hold information and manage the cash flow of them. Only when enterprises publicly disclose their cash and financial flows will the banks boldly provide unsecured loans. Because, the unsecured loans can only be done for businesses that are highly appreciated by the bank for internal credit, and this is difficult to apply to tourism enterprises. Therefore, the banking industry needs the cooperation of the Department of Tourism in evaluating the brand reputation, financial capacity, and the ability to carry out business plans, as a basis to provide support.
Dr Can Van Luc, financial expert:
Both enterprises and banks need to speak with one voice
The bank’s debt restructuring, as well as the disbursement of the low-interest rate credit package of VND300 trillion, needs both enterprises and banks to speak with one voice. To enjoy the preferential debt rescheduling and interest rate reduction, enterprises need to have goodwill to prove the damage caused by Covid-19 pandemic, instead of thinking that banks establish procedures and conditions to make it difficult for enterprises. Because when banks accept to reduce their profits by lowering their interest rates to support enterprises, they must support the right subjects, otherwise, they will be held responsible when being inspected. Not to mention that banks mobilise deposits from people, so they must also be cautious to preserve their capital.
