City Council says banks need to ease lending conditions
By Thanh Thuong - The Saigon Times Daily
HCMC – Local banks should loosen lending conditions for corporate borrowers instead of cutting lending rates only, said the Economic-Budgetary Committee of the HCMC People’s Council at a meeting on economic restructuring last Friday.
Van Duc Muoi, member of the committee and general director of Vissan Co., Ltd, noticed the ordeals faced by local enterprises are regulations from banks to screen loan applications. There is a high possibility that cash-strapped companies can’t borrow money from preferential credit packages because of such stringent conditions, Muoi said.
Echoing Muoi’s view, deputy general director Vuong Duc Hong Quan of the Hochiminh City Finance and Investment State-owned Company (HFIC) said local companies often failed to take out loans due to strict regulations on collateral. As the municipal credit guarantee fund is still unable to provide guarantee for borrowers, the central bank should consider this matter to support enterprises to overcome economic hardship, Quan said.
Similarly, vice director Tu Minh Thien of the city’s Hi-tech Agriculture Park wondered whether troublesome lending conditions have prevented enterprises from accessing preferential credit programs at banks as well as lending supports from State agencies in the city.
Replying to the issues raised by the aforesaid members, vice director Nguyen Hoang Minh of the central bank’s city branch said local companies have in fact been able to borrow money since last month thanks to lowered lending rates. Total outstanding loans of the banking system in the city have reached an estimated VND779 trillion in the year to date, up by 1.96% from the end of last year, Minh clarified.
Minh, however, forecast the city’s credit growth rate will surge only 8-10% this year, attributing it to stagnant lending activities given bad debt ratios at local lenders constantly rising in the first six months of the year, from 3.6% in end-2011 to over 6% now. Minh warned it would be harder for credits to grow if the problem is not tackled properly.
As for lending rate cuts in the locality, Minh said the lowest level is set at 13% per annum for four priority groups, but there are also a few lenders offering an annual lending rate of 11.5%.
Minh asserted lending rates for other customers still stay high, at up to 18% a year though this rate is on the downtrend. As many banks had to mobilize money at a high rate earlier, it will take time before they can slash the lending rate.
According to Minh, the city branch is proposing the central bank to instruct commercial banks to give new credits to enterprises at lower rates so that they could repay present loans. In addition, the agency is seeking approval of the Government on extending debt payment schedules for corporate borrowers in priority sectors to help them get new loans.