State Bank of Vietnam Governor Nguyen Van Binh expects that the easing of credit for the real estate market will not only help investors sell property but also help companies of related industries like steel and cement to clear out inventory. This move also reduces bad debts at banks.
The State Bank of Vietnam (SBV) announced new regulatory solutions and credit policies for the upcoming time on April 11, 2012. It is noted that the banking sector will focus on dealing with credit structure to create lending rooms for companies to expand production and business operations.
The central bank requested credit institutions to reschedule overdue repayment periods for borrowers if their production and business operations were negatively affected by domestic and global economic slowdown that led to slow sales and export.
Credit institutions and branches of foreign banks were told to actively work with borrowers to cope with difficulties in repayment of loans and get access to bank loans in order to facilitate borrowers to gradually restore, maintain and expand production and business, ensure loan payment capacity, reduce bad debts, and continue to extend new loans to those customers with effective plans and projects, and solvency.
As for real estate field, the SBV asked credit institutions to control the proportion of loan outstanding for the discouraged sectors at the maximum level of 16 percent out of total loan outstanding. However, the restriction is lifted on loans used to build, repair, or buy houses for the purposes of residence or both residence and rent, and these loans will be repaid by customers’ non-salary income; loans used to build, repair or buy houses for rent or sale; loans used to develop real estate projects in urban areas.
Governor Nguyen Van Binh said outstanding loans for real estate account for about 10 percent but secured property loans are very large, accounting for 60 percent. “This is the reason for step by step removal of credit difficulties for real estate, especially when the housing demand of the people remain high and prices are reasonable for buying for residence purpose,” said Binh
As for securities field, the Government and the SBV do not encourage lending for securities investment. Therefore, the central bank requires banks to control the proportion of loan outstanding and discount valuable papers for the securities sector at the maximum level of 16 out of total loan outstanding, excluding loans for employees of State-owned enterprises to buy IPO shares when their companies are transformed into joint stock entities.
Giving explanations to this option, SBV Governor said this is a long-term capital market. Thus, it should not be built on short-term credits from banks for investment. He believed that the stock market will still thrive without [short-term] bank loans because it enjoys positive macroeconomic factors and interest rate cut. According to Mr Binh, the stock market will not rise quickly but sustainably in the coming time.
As for bad debt at banks, he asserted that bad debts tend to increase in credits for all industries. The nonperforming loan ratio was 3.2 percent at the start of the year but has climbed to 3.6 percent now. The ratio is much higher in some credit institutions. Hence, banks need to restructure loans to live through difficulties and continue development.
As for consumer credit, the central bank opened all kinds of consumer loans, except for consumer loans foreign countries, including tourism and medical treatment abroad. Personal loans are still discouraged, except for loans for building, repairing or purchasing houses to be repaid by borrowers’ salary and wages; for buying transport vehicles and family equipments, and paying for study and medical treatment at home.
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