Many banks said that their credit growth is still negative although many packages with preferential interest rates have been launched.
Banks are continuing to promote preferential loans to support customers affected by the Covid-19 pandemic.
For example, Export Import Commercial Joint Stock Bank (Eximbank) has launched a credit package worth eight trillion dong for businesses hit by the Covid-19 pandemic at a minimum interest rate of five percent per annum. In particular, a five trillion dong package with interest rates from 6.99 percent per annum are offered to small and medium enterprises, and a three trillion dong package with interest rates from five percent per annum is offered to large-scaled enterprises.
Maritime Commercial Joint Stock Bank (MSB) has also introduced a mortgage credit package with interest rate of only 6.59 percent per annum, applicable from now until March 31st 2020 for individuals and business households to easily access loans in during the pandemic.
Director of Credit Department of Economic Sectors Nguyen Quoc Hung affirmed that the banking industry would ensure sufficient capital for the economy.
Many credit institutions (CIs) have registered to participate in the preferential credit package worth 285 trillion dong with interest rates being 0.5 one percent per annum less than the previous time.
CIs will base on their financial situation to give an appropriate interest rates. Businesses when borrowing capital must also meet the conditions on their ability to operate to ensure input materials and prove output sources.
However, Hung said that the Covid-19 outbreak has affected many sectors and the demand for loans.
By March 4th, the outstanding credit of the economy only increased by 0.1%, lower than the 0.85 percent recorded in the same period of 2019.
Commenting on the preferential loan package of 285 trillion dong, a financial expert said that since the current operations of many businesses have been stopped, or even ceased, the credit demand is not high.
The current difficulties of businesses at the present time is not from the capital market, but the commodity market which is being stalled.
Thus, this support credit package will only work when the market recovers. At present, it is more practical if banks focus on reducing lending interest rates and freezing debts for businesses.
Banking and financial expert Bui Quang Tin also said that the market is unlikely to absorb this mount of hundreds of trillion dong in a short time.
At this time, in addition to the low interest rate credit packages, the best thing banks should do is to consider cutting lending interest rates.
In the report issued on March 2nd, Moody’s said that the asset quality of Vietnamese banks would be at risks because of the Covid-19 pandemic. If it is prolonged, the bad debts in production and business, trade and some other areas will increase, because Vietnam is highly dependent on the global supply chain.
Therefore, the injection of a credit package of 250 trillion dong under the direction of the government, adjustment of loan terms, and extension of debt maturity for businesses hit by the pandemic is a timely solution in the short term, both helping businesses and banks overcome hardships.
According to director of Credit Department of Economic Sectors, the Covid-19 pandemic may turn 1,000 trillion dong of outstanding loans of the system into bad debts. Banks themselves understand that supporting businesses is also saving themselves. By March 4th, at least 926 trillion dong outstanding loans of 23 banks, equivalent to 11 percent of the outstanding loans of the entire banking sector, have been affected by the Covid-19 outbreak.
In the context when the Covid-19is becoming more and more complicated, greatly affecting people’s lives and business activities, banks said they would focus on restructuring the affected debts.
Ngo Quang Trung, general director of Viet Capital Commercial Joint Stock Bank said that during this period, his bank focuses on debt restructuring because the immediate impacts of the pandemic have hit revenue, income and short-term cash flows of customers.
For existing customers, including both individuals and businesses, the bank has a policy of rescheduling repayment terms, reducing or exempting late payment interests, and keeping the debt group for affected customers.
Corporate borrowers operating in the affected industries and experiencing sharp decline in main revenue from business activities compared to the same period will be entitled for an interest rate cut of a maximum 0.5 one percent per annum, corresponding to short, medium and long term loans. The loan support package for corporate customers is up to one trillion dong.
Individual customers borrowing capital for the purpose of home repair, construction, production business, and consumption will be applied interest rates from only 8.38 percent per annum.
Customers borrowing unsecured loans will also be offered competitive interest rates from only 14.59 percent per annum.
Leader of another bank also said that in the current context, it is difficult to boost lending as normal, while the bank focuses on debt restructuring.
Thus, the bank’s 10 percent credit growth limit assigned by the State Bank of Vietnam (SBV) from the beginning of the year has not been used. Indeed, some banks even recorded negative credit growth in the first two months of 2020.
Phan Duc Tu, Chair of the Board of directors of Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) said that the bank’s capital mobilisation and outstanding credit by the end of February 2020 respectively declined by 1.6 percent and nearly two percent.
Up to date, CIs have restructured about 21.7 trillion dong of outstanding credit; reduced and exempted interest rates for 8,000 customers with outstanding loans of about 350 trillion dong; and are considering more than 34,000 customers with outstanding loans of 185 trillion dong.
Banks are also completing reviewing applications of 5,400 customers with an expected new loans of about four trillion dong. At the same time, banks also keep the debt groups unchanged and considered lowering interest rates for the new loan packages.
After receiving reports of CIs assessing the impact of the pandemic, the SBV has proactively directed banks to restructure and maintain the debt groups, reduce and exempt interest rates for customers in the affected fields, and issued a guiding circular.
Customers with debts meeting the conditions will be offered interest rates and fee reduction and exemption.
The SBV has also stipulated conditions for CIs to maintain the debt groups of the restructured debts.
According to economic expert Huynh Trung Minh, this will create opportunities for businesses to continue to borrow new loans, and CIs also have chance to lend out and balance their finance. However, it is difficult to expect a strong rise in outstanding loans.
According to Maybank Kim Eng, since the credit growth in the first half of 2020 will be low due to the impact of the Covid-19 epidemic, the SBV sets lower credit growth limits for each bank, while still providing a reasonable amount for commercial banks to grow. The SBV required banks to strictly control asset quality, comply with regulations and support the SBV’s policies, such as lowering lending interest rates to support domestic businesses.
This target has been set before the Covid-19 outbreak and has become an urgent action which the government and the SBV are directing banks to take.
BIDV Securities Company (BSC) also forecasted that the credit demand would be slowed down and the credit growth in 2020 would be 12.5%, lower than 2019′s.
According to BSC, the demand for credit will fall because the economy will decelerate, GDP will grow slowly, and the needs for borrowing long-term loans for production and business will also increase slowly.
