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More targets to receive the loaning interest rate reduction

More targets to receive the loaning interest rate reduction

Wednesday 03, 06 2020
The State Bank of Vietnam will adjust the mechanism and policies towards expanding the list of target customers who may receive interest rate reduction, debt reform, and new favorable loans, etc.

The Bank – Enterprise Connection Conference in Ho Chi Minh City with the theme of assisting customers facing difficulties due to COVID-19 was held by the SBV on 29th May.

Even big enterprises need support

During the conference, Tran Viet Anh, the Vice President of the Enterprise Association of Ho Chi Minh City, suggested that commercial banks should consider extending the USD loan limit for enterprises to import plastic materials when their prices were still approximately 50% lower than the ordinary. Export and import enterprises with healthy finance and past credit also wanted to receive assistance in the letter of credit establishment guarantee to cooperate with foreign partners.

“The majority of banks provide former and traditional customers with proper support, yet they should also pay attention to small and medium enterprises, as well as start-ups. During the high time of the pandemic, some enterprises managed to maintain stable and good operation, but at the moment, they are starting to be affected. Therefore, the banking sector also needs to prove bigger enterprises with more comprehensive support policies instead of focusing on helping enterprises which were severely damaged” – Tran Viet Anh suggested.

Ly Kim Chi, the President of the Food and Food product Association of Ho Chi Minh City, also commented that there were still many enterprises in the industry that were facing difficulties and slow rate in approaching the credit assisting policies. The number of enterprises in the association which received interest rate reduction and exemption, as well as new loan with favorable interest rates, were not as many as expected. The reasons for this were the strict loaning conditions and the complicated damage reviewing and proving procedures; Moreover, medium, small, and micro-enterprises found it hard to approach favorable policies because the SBV required them to prove their revenue and profit drops in the first quarter of 2020.

“The food and food products industry is seasonal, particularly in the annual Lunar New Year season, their revenue could increase by 30%-50% so it will be challenging to prove the reduction in the first quarter. We have committed to maintaining the supply of the necessities during the pandemic season without increasing prices, and have used the materials saved in 3-6 months in the production. However, it is difficult to gain access to the favorable capital to buy the production materials for the new season” – Ly Kim Chi said.

Others suggested further reduction of the loaning interest rates in the context of enterprises being heavily-affected and the complicated pandemic situation in the world affecting the supply chain in terms of materials import and export, as well as domestic consumption. Some commercial banks have also required enterprises to provide additional collaterals as risk prevention even though enterprises have never been late on a payment and are currently facing extreme problems due to the pandemic.

Pham Van Viet, the General Director of Viet Thang Jeans and the Vice President of the Ho Chi Minh City Textiles Association, suggested that the SBV should be more flexible in adjusting the USD/VND exchange rate to support export, to reduce the interest rates of the current loans to 2%/year with a supporting period of up to 24 months as enterprises’ revenues are sharply declining, to extend working capital loans and the debt restructure period due to the difficult situation forecasts.

“Even retail enterprises like us also suffer from a 30% revenue reduction compared to the previous time and the problem here is the immensely high inventory of masks and hand sanitizer of relatively 400 billion VND, and we do not know when this inventory will be used up” – Tran Lam Hong, the representative of Saigon Co.op said.

Other enterprises suggested that the Government should have specific stimulus packages for enterprises in addition to the interest rates reduction in accordance with the financial capability of each commercial bank, as banks are also enterprises.

Economist: The most severely damaged economy due to COVID-19

Transparent conditions to avoid exploiting the policies

More targets to receive the loaning interest rate reduction

In order to provide enterprises with capital to maintain production and operation in the new normal period, many banks say that they are continuing the implementation of favorable credit packages with interest rates much lower than the common level. Tiet Van Thanh, the General Director of the Vietnam Agriculture and Rural Development Bank (Agribank) says that in the last 1 month, the bank has established the 100,000-billion-VND credit package to help its customers overcome the pandemic.

“Currently, many customers of Agribank are receiving an interest rate which is 2.5% lower than ordinary and many industries are receiving loans with an interest rate of only 4.5%/year. To approach this beneficial capital, the most important thing is that the customers must have the legal documents according to the regulations to maintain the safety for both the bank and themselves” – he says.
Why do banks ask for damage evidence before assisting enterprises? Deputy General Director of the Vietnam Industrial and Trade Joint Stock Commercial Bank (VietinBank) Nguyen Hoang Dung says that it is of extreme necessity because “the banks cannot support enterprises if they do not know their own losses”. It will not be a policy unless there are clear conditions and regulations to protect both the banks and enterprises, avoiding policy exploitation.

Answering the concerns of enterprises, Deputy Governor of the SBV Dao Minh Tu says that the SBV’s policies in addressing difficulties of enterprises affected by COVID-19 have been implemented early. Until now, the SBV will continue research and adding regulations to further support enterprises in terms of the time to extend or postpone the debts, interest due or conditions for businesses to access new loans, etc.
“The banking sector will be more flexible in terms of procedure and consider adjusting some regulations to suit the practice, assisting enterprises while maintain the legal corridor, preventing bad debts from reappearing and ensuring the safety of the credit organization system. Commercial banks can be active and flexible on a case-by-case basis, and clearly categorize each type of target to provide assistance in the legal framework” – Deputy Governor Dao Minh Tu says, simultaneously expressing the viewpoint of supporting healthy enterprises with the breakthrough capability to revive the economy.


Banking & Finance

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