VietNamNet Bridge – Banks have “relaxed their severity,” loosening the conditions for lending capital, but businesses have no more assets to mortgage for the loans.
It’s obvious that the State Bank’s decision to slash the dong ceiling deposit interest rate to 12 percent aims to rescue businesses which have been bogged down in difficulties. However, analysts have warned that the decision may not help much.
Businesses’ assets nearly exhausted
Deputy Chair of the Vietnam Cashew Association (Vinacas) Nguyen Duc Thanh said that most of the assets of enterprises are not valuable, just several thousands of square meters of production workshops.
Meanwhile, Thanh said, with the same mortgaged assets, businesses would be able to borrow smaller loans this year than in the previous year as a result of the bank policy on cautious disbursement.
Thanh said that though the procedures remain unchanged, the conditions for accessing bank loans have become stricter. “Banks now tend to keep stricter control over the mortgaged assets, and they now refuse to guarantee for enterprises to open letter of credit (L/C),” Thanh said.
“In other words, banks have set new technical barriers, which could be seen as a big obstacle to businesses,” he added.
A lot of businesses, thirsty for capital, but do not have assets to mortgage for loans, after they had sell the assets to pay debts when they took loss. Other businesses have assets and want to mortgage the assets for loans, but they have been refused by banks.
Nguyen Van Duc, Deputy Director of Dat Lanh Real Estate Firm, said that real estate firms’ cash has become exhausted because apartments have been left unsold in the last two years.
Duc said he can see some signs showing that some commercial banks attempt to “swallow” real estate firms. The banks refuse to provide more loans to the enterprises, even though they have real estate products to mortgage. Once the real estate firms die because of the thirst for capital, the banks would turn up to buy the enterprises.
Some enterprises, which were on the verge of bankruptcy, had to sell their projects, or sell 30-70 percent of their stakes to banks or investment funds.
“The interest rate reduction is really good news, but it is not a miracle,” Duc said.
Businesses say it’s still too early to rejoice
Tran Van Nguyen, Deputy Director of the Construction Company No. 3, which is developing a project on building apartments for low income earners, complained that he still cannot borrow preferential loans from the Vietnam Development Bank (VDB) for the TNT Sai Dong project as promised.
Governor of the State Bank Nguyen Van Binh said the central bank has turned the green light on for commercial banks to lend to real estate developers in order to defrost the real estate market. However, the developers say it’s too early to say that the market can be revived.
TNT Sai Dong is now priced at 13.27 million dong per square meter. If the real estate developer has to borrow money with the interest rates of over 20 percent, it would have to raise the sale prices. If so, the sales would go slowly, while the investor would not be able to get money to pay bank debts.
Deputy General Director of Vicoland, also a real estate firm, said he does not care much about the new signs in the monetary market, though he complained he is facing big difficulties when he does not have money to implement the project, while people do not have money to buy houses and apartments.
Source: Tien phong