In order to stimulate credit demand in the context of the complicated situation of the Covid-19 epidemic, banks have launched a series of preferential credit packages, reduced lending interest rates and rescheduled debts for customers.
Tien Phong Commercial Joint Stock Bank (TPBank) said that about 1,000 customers with outstanding loans of about 10 trillion dong are likely to be unable to repay the loans when they due, because of the Covid-19 epidemic’s impacts. Therefore, the bank is willing to reduce profits to share difficulties with customers.
Vietnam Public Commercial Joint Stock Bank (PVcomBank) has implemented numerous measures to support customers hit by the epidemic, in response to the Circular 01/2020/TT-NHNN recently issued by the State Bank of Vietnam (SBV).
Accordingly, PVcomBank will conduct an evaluation, review and restructure the repayment terms, reduce interest rates, maintain the debt group for individual and corporate customers hit by the Covid-19 epidemic.
At the same time, PVcomBank also focuses on fully and timely meeting the capital needs for production and business, speeding up the reform of administrative procedures, shortening the time for approval of loan applications, improving the ability to access to loans of customers.
The bank has just launched a credit package of 10.5 trillion dong with preferential interest rates from 7.49 percent per annum for production and business, consumption, car, home repair and construction loans, etc.
Other banks have also quickly joined in. For example, Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) registered an interest rate support package worth 120 trillion dong, while that of Commercial Joint Stock Bank for Agriculture and Rural Development of Vietnam (Agribank), Military Commercial Joint Stock Bank (MB), and Asia Commercial Joint Stock Bank (ACB) is respectively 100 trillion dong, 35 trillion dong and 15 trillion dong.
The SBV’s Department of Credit for Economic sectors said that banks are currently building a credit support package worth 285 trillion dong. The average lending interest rate of banks will decline by 0.5 one percent per annum compared to the interest rate level in the market. This support comes entirely from banks and does not use the budget source.
Accordingly, not only rescheduling the repayment term and maintaining the debt group, banks also use a considerable amount of credit for new loans with preferential interest rates to support businesses to maintain production and business activities.
While lending out at lower interest rates than the common level, banks will have to minimise costs, and even sacrifice profits.
Up to now, credit institutions (CIs) have restructured about 21.7 trillion dong of outstanding loans. CIs have also reduced and exempt lending rates for 8,000 customers with a balance of about 350 trillion dong. CIs are considering the cases of 34,000 customers with outstanding balance of 185 trillion dong.
Banks are also finalising the application file to review 5,400 customers with an expected new loan of about four trillion dong.
At the same time, CIs also do not change the debt group and consider reducing or exempting interest rates for new loans.
The SBV has issued a circular regulating the rescheduling, exemption and reduction of interest rates to support businesses in the Covid-19 epidemic. Accordingly, businesses with outstanding loans should meet three conditions. Firstly, the outstanding loans arise from lending, financial leasing activities. Secondly, the outstanding loans arise from January 23rd to three months after the prime minister announced the end of the Covid-19 epidemic. Thirdly, customers are assessed as being unable to pay their debts on time due to the Covid-19 epidemic. The specific criteria will be included in internal documents sent to banks. Customers with debts meeting the above conditions will also be entitled to interest and fee reduction or exemption.
At the same time, the Circular also stipulates that CIs can maintain the debt groups of the restructured debts.
However, director of Credit Department of Economic sectors Nguyen Quoc Hung said that the Covid-19 epidemic has hit many sectors and affected the demand for loans of businesses.
As of March 4th 2020, the total outstanding loans of the whole economy only increased by 0.1 percent while it was 0.85 percent in same period of 2019.
According to report of CIs, the outstanding loans of customers hit by the Covid-19 are 926 trillion dong, accounting for 11 percent of the total outstanding loans. The SBV has received many written proposals of associations and businesses from many industries such as cement, footwear, education, etc.
Hung affirmed that the banking sector will ensure sufficient capital supply to the economy and businesses. CIs will base on the situation, financial health to give appropriate rates.
Businesses when borrowing capital should also meet the conditions for operational capability, ensure the input materials and prove the output sources.
Commenting on the preferential loan package worth 285 trillion dong, a financial expert said that the operation of many businesses have been stagnant or even stopped. Thus, the demand for capital in the market is not high.
Indeed, the current difficulty is not the issue of the capital market but the stagnant commodity market. Therefore, this credit package will take effect when the market recovers. For the time being, it is more practical if banks focus on reducing interest rates and freezing debts for businesses.
Financial expert Dr Bui Quang Tin also said that the market is unlikely to absorb this amount of capital in a short time.
At the present time, in addition to the low-interest rate credit packages, banks should consider reducing interest rates for businesses’ outstanding loans.
