Responding to the reporters at the regular government press conference in the afternoon of June 2, the deputy Governor of State Bank of Vietnam (SBV) once again affirmed that, although SBV frequently instructed credit institutions to step up funding support for businesses to cope with the Covid-19 as well as to recover from the pandemic, but they could not lower credit standards. “The capital support for businesses and ensuring credit standards must be carried out in parallel. The reduction of credit conditions does not affect the capital support for businesses and individuals these days,” deputy Governor Dao Minh Tu emphasized.
It can be affirmed that ensuring the capital with a reasonable interest rate for the economy in general, the business community in particular is always a consistent goal in the management of SBV. Accordingly, right from the beginning of the year, the Governor issued Directive No. 01/ CT-NHNN requiring SBV units to direct the credit institutions (CIs) to increase credit growth effectively, focusing credit on production and business sectors and priority areas according to the government’s policy; CIs actively balance capital sources and usage to ensure liquidity, timely meet the credit and payment needs of the economy.
As soon as the Covid-19 pandemic appeared in Vietnam, SBV was also one of the first ministries to carry out many solutions to support the business community and people to overcome the difficulties caused by the pandemic, in which ensuring capital is one of the top priorities. Accordingly, in Directive 02/ CT-NHNN dated 31/3/2020, SBV Governor requests to concentrate credit for priority areas, production and business sectors; respond promptly and fully to the economy, especially to restore and maintain production for industries and sectors affected by the pandemic.
In order to support banks to reduce interest rates and share difficulties for businesses and individuals affected by the pandemic, SBV has twice cut the operating interest rates with reductions up to 1-1.5 percent per year. The ceiling of short-term lending interest rate in dong for priority areas was also reduced by one percent to five percent per year.
In response to the direction of SBV, banks have implemented many credit support packages with lower interest rates from 2 percent to 2.5 percent per year compared to the period before the disease to support businesses. Accumulated from January 23 to now, loan sales have reached over 659 trillion dong for more than 188 thousand customers, nearly three times higher than the figure of 250 trillion dong stated in Directive 15/ CT-TTg of the prime minister.
That is, for businesses with loan needs, and for difficult businesses that do not have new loan needs, their support needs focus on old loans. Understanding that, SBV quickly issued Circular 01/2020-TT-NHNN creating a legal corridor for banks to restructure the repayment, exemption and reduction of interest rates, fees, and maintain the debt group to support businesses. Up to now, all credit institutions, including financial companies and foreign banks, have stepped up strongly, restructured the repayment term for over 215 thousand customers with outstanding loans of 138 trillion dong, waived, reduced, and lowered interest rates for over 320 thousand customers with nearly 1.13 quadrillion dong outstanding loans.
SBV also held a conference to connect banks and businesses in localities throughout the country to study the difficulties in the process of implementing support solutions as well as collect recommendations from the businesses. On that basis, SBV is drafting a circular amending and supplementing Circular 01 in the direction of expanding the scope of support for enterprises.
However, although the support can be expanded and lending rates may be reduced, the credit standard is not lowered, which is a principle of immutability. Because the capital that lenders make is made up of deposits from residents and economic organisations, so it is the banks’ responsibility to ensure all this capital. If lowering credit standards, the risk of bad debts, even loss of capital is very large, thereby threatening the operation of credit institutions and the entire banking and financial system of the country. The banking system has safe and healthy operations, in order to effectively support the economy and businesses to overcome current difficulties.
In fact, the lesson of bad debts in previous years due to the banks’ race of high credit growth into risk areas such as real estate and securities… is still valid when the banking system is struggling to handle these bad debts.
“Credit support is necessary but it is crucial to maintain conditions and standards to ensure safety not only for this period but for many years to come, a safe and healthy banking system will ensure support the economy,” stressed SBV Governor Le Minh Hung.
