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Generous but hard-to-get

Generous but hard-to-get

Thursday 09, 04 2020
Banks have been reducing interest rates and providing preferential loan packages to "save" businesses facing difficulties due to the COVID-19 epidemic,

Banks have been reducing interest rates and providing preferential loan packages to "save" businesses facing difficulties due to the COVID-19 epidemic, but many companies complain that these packages are “extremely difficult to get”.

It may be generous, but it is not that easy to get access to

​Nguyen Xuan T, the owner of an export handicraft manufacturer in Hoc Mon District (Ho Chi Minh City), laments that although his line of business is not in the tourism or textile group, since the outbreak of COVID-19, all of his production and business activities have been stagnant.

“I borrowed nearly VND 600 million from banks, with an interest rate of 13% / year to buy materials and machines. Each month I have to pay about 8 million in both principal and interest. In early April 2020, many banks announced to reduce lending rates but when we asked the bank staff, they said they were waiting for leadership’s approval and would notify us later”.

Ms. Le Thanh Tra, Director of Thanh Tra Import-Export Company (H.Cu Chi-HCMC) specializing in exporting agricultural products to China also complains that she still cannot access the preferential regime from banks after several efforts.

The reason given by the bank is that the previous loan packages of Ms. Tra had been preferentially 7% / year so they could not be further reduced. "In fact, businesses are facing a lot of difficulties, including the stagnated goods, while still having to pay dozens of workers regular wages, and their bank debts still need to be paid, etc.

I have asked banks for deferred payment and debt extension, but they warned that I would be at risk of being classified as bad debt, and it would be difficult for me to borrow capital from them later” – Ms. Tra said. Mr. Nguyen Huu Duy, General Director of Van Thien Sa Co., Ltd. specializing in producing blankets, sheets, pillows, and mattresses, said: “We have applied for banks to reduce taxes very early due to the extremely difficult business situation.

Despite us being a long-term partner, if they want to reduce our taxes, banks still need to review many conditions such as having no bad debt, being VIP customers or long-term loyal customers, and the ability to recover, etc. As far as I know, not all companies could enjoy the preferential interest rates, and it is the banks that get to decide the reduce level”.

Consider things carefully before making a reduction decision.

​Since April 1, a series of commercial banks have rushed to announce interest rate reduction packages, such as Vietcombank with a rate of 2-2.5% / year. The lending interest rate will decrease to 4.5-5% / year, lower than the mobilizing interest rate; the preferential loan interest rates will be reduced to 2-4.5% / year; VietinBank has also reduced the lending rates to 2 - 2.5% per year, firstly for essential fields, etc.

businesses facing difficulties due to the COVID-19 epidemic

However, many businesses say that these reductions are not easy to access, as it still depends on specific criteria for banks to decide whether businesses can receive interest rate reductions or not.

The representative of a bank with a branch in District 3 says that not all businesses are entitled to interest rate reduction and debt structure, as banks will consider these on a case-by-case basis.

For example, customers have to do business in industries affected by the epidemic, they must have no bad debts, and their loans must not have been given a preferential interest rate yet, for if there has already been a preferential interest rate, banks will not consider reducing.

In terms of structure, banks will only structure the principle amount for businesses in a period of 3-6 months, not the interest structure, due to the impact on the accrued interest.

The representative also shares that the difficulty of banks when implementing debt structure is not the accrued interest. The cost of staff salaries, office leasing, and capital mobilization, etc. still has to be paid while the interest is not calculated, so if the debt structure is large, it is difficult for banks to avoid losses.

Although appreciating the efforts to overcome difficulties and to "save" enterprises of the banking sector, Dr. Nguyen Tri Hieu, an economist, notes that lowering interest rates is not enough to bring the economy through the crisis.

According to him, the reduction of executive interest rates only affects the market, while the problem of the economy is not only in the monetary economy but also in the commodity economy, whose market is stagnating.

“I think that monetary policy measures are only supportive measures. It requires the support of the fiscal policy, through quick and strong support packages, to help businesses that are seriously affected by the COVID-19 epidemic to have the liquidity to cover expenses, pay their partners and their employees, as well as to pay the interest of their loans, etc.” – Mr. Nguyen Tri Hieu recommends.

​>> Measures used by banks amidst the Covid-19 epidemic to maintain operation


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