In the implementation of the government’s solutions and directions concerning COVID-19 prevention and control, the banking sector has actively supported both people and businesses in addressing difficulties through disbursing support packages and reducing lending interest rates, contributing significantly to stabilising the macroeconomy and people’s lives.
However, apart from enterprises that have received timely “relays”, there remain some who have not yet accessed these preferential capital sources.
Expectations put on capital “lever”
Together with fiscal support policies, a credit aid package worth VND285 trillion (US$12.11 billion) offered by the system of credit institutions is being much anticipated and expected by businesses as a “lever” to help them overcome the negative effects of the epidemic. According to the CEO of Sun Group Bui Thi Thanh Huong, thanks to the State Bank of Vietnam (SBV)’s Circular 01, Sun Group has received support from its partner banks in reducing interest rates by 0.5-1 percent and extending the repayment period for loans. At the same time, the company has also been assisted by the banks’ debt rescheduling and loan restructuring policies in the context of the impact on its cash flow due to COVID-19.
“It is forecast that Sun Group’s revenue in 2020 will decline by 70 percent compared to the year’s projected figure and 80 percent year-on-year, seriously affecting the company’s cash flow. Therefore, the banks’ support has somewhat helped us reduce the burden in this difficult period and given us motivation for post-epidemic restructuring and investment,” Huong said.
Also heavily affected by COVID-19, the Tung Lam Development Joint Stock Company posted a year-on-year 69 percent fall in its Q1 revenue, prompting the firm’s 2020 revenue to be estimated at around VND105 billion (US$4.46 million), down 70 percent compared to last year. Immediately after the prime minister declared the epidemic, the banks providing capital to the company, such as BIDV, Vietcombank and Agribank, met with Tung Lam’s leaders to explore the difficulties currently faced by enterprises. “Banks have really joined with enterprises over the past few days to work out appropriate financial solutions. Implementing the SBV’s Circular 01, all banks are considering plans to extend all outstanding loans in 2020 and support us regarding interest rates. In particular, BIDV has announced a 1 percent interest rate reduction for our VND500 billion outstanding loans until the end of December 31, 2020 (equivalent to VND5 billion a year),” said Nguyen Thi Thu Ha, general director of the Tung Lam Nguyen Development JSC.
However, alongside banks’ measures to restructure debts, reschedule debts and lower interest rates, many businesses are also waiting for banks to offer new loans with preferential interest rates. According to the Committee for Management of State Capital at Enterprises, by the end of the first quarter of 2020, seven out of 19 groups and corporations began to lose balance between their revenues and expenditures, with national flag carrier Vietnam Airlines having suffered the heaviest damage. The suspension of all international routes and the operation of domestic routes at a minimum level have forced the national airline to deplete its money reserves and to increase its short-term loans to meet payment needs. Vietnam Airlines is in desperate need of about VND12 trillion (US$0.51 billion) to be disbursed right from April as one urgent solution to overcome such an extremely difficult period. However, a representative of the carrier said that so far, Vietnam Airlines has not yet been able to access the VND285 trillion credit support package from banks.
Drastic and specific measures needed
According to economic experts, the implementation of support packages should be timely and target the right subjects, with top priority given to businesses operating in the fields of aviation and tourism, which are suffering the most from the impact of the epidemic.
“As one of the tourism businesses seriously affected by COVID-19, we expect the government, ministries, sectors, especially the SBV and commercial banks to continue issuing stronger and more specific support policies to help businesses through their difficulties,” Sun Group CEO Bui Thi Thanh Huong proposed. Specifically, banks need to continue providing new loans to help enterprises make reinvestments and boost their business. Besides, the SBV should allow the application of Circular 01 to corporate bonds to synchronise financial support for the business community.
In fact, since the initial outbreak of the coronavirus epidemic, the whole banking sector has proactively designed prevention and control plans to ensure the safe, smooth and effective operation of the system. It is just nearly two weeks since the SBV issued Circular 01, but the whole sector has responded dramatically to the document. Accordingly, commercial banks have simultaneously implemented a series of preferential credit packages, programmes and products to the people and companies, especially customers with outstanding credit balances damaged by the disease, with positive results having been reported. Regarding the disbursement of the VND285 trillion credit support package, statistics from the SBV showed that by the end of March, 47,000 customers have successfully accessed preferential loans with a capital of roughly VND80 trillion (US$3.4 billion).
Chair of the Board of directors of Vietcombank Nghiem Xuan Thanh said that to support businesses and the people, Vietcombank has synchronously implemented a reduction of lending interest rates and service fees for customers. Specifically, total outstanding loans of epidemic-impacted industries and sectors which are supported by Vietcombank through the lowering of interest rates by 0.5-1.5 percent have so far reached over VND112.7 trillion (US$4.78 billion). Also, Vietcombank has disbursed new loans worth more than VND41.2 billion (US$1.75 billion) since January 23, contributing significantly to supporting customers affected by COVID-19 to maintain their production activities and balance cash flow. At the same time, Vietcombank has accompanied its customers in reviewing their business production and finance & cash flow balance measures to offer appropriate advice and support. Total outstanding loans of epidemic-affected customers for whom Vietcombank have maintained debt classification so far this year have reached more than VND8.2 trillion (US$348.5 million). In the near future, the bank will continue considering the restructuring of debt and the maintenance of debt classification for many other customers who have suffered heavily from the impact of COVID-19.
According to SBV Governor Le Minh Hung, the central bank issued Directive 02 on March 31 requesting credit institutions to continue strongly implementing the directions of the government, the prime minister and the Governor of the SBV to remove difficulties for the economy, especially in relation to debt restructuring activities and the maintenance of debt classification. In addition, the SBV also had a meeting with 20 credit institutions (accounting for about 75 percent of total outstanding loans to the economy), and all credit institutions agreed to reduce at least 2 percent of lending interest rates compared to the pre-epidemic period. This demonstrates the great responsibility of credit institutions to the obstacles of businesses, customers and borrowers. In order to contribute to addressing the difficulties of the economy, the SBV will continue to direct the implementation of restructuring of repayment periods and the maintenance of debt classification, as well as the reduction of lending interest rates in the near future.
