Production Needs to Move on

10:41:57 AM | 1/4/2020

According to the latest updated data from the State Bank of Vietnam (SBV), from the beginning of the year to March 24, the new credit increased by only 0.5% from the end of 2019. Given the current situation, it is unlikely that credit growth will reach the target as set at the beginning of the year.

To rescue the economy and businesses, the Government has decided to pump a soft credit package of VND285 trillion and a tax cut/exemption package of VND30 trillion for businesses troubled by the Covid-19 epidemic.

Businesses find it hard to absorb available soft loans

According to Mr. Nguyen Quoc Hung, Director of the Credit Department under the SBV, capital demand is still huge and real. However, during this period, a majority of borrowers want to postpone or extend the repayment period to avoid being assigned overdue debt.

A lot of banks offered preferential loan packages. Before January 2020, Asia Commercial Bank (ACB) announced a credit package of VND25 trillion carrying a lower rate than commercial rates by 1-2% to support business. By the end of February 2020, as many as 21,900 customers got a combined loan of more than VND20 trillion. ACB also pledged to expand this package after it ran out. As for customers affected by the Covid-19 epidemic, ACB provided an additional loan package of VND5 trillion for them to recover business operations after the epidemic. For this package, the loan term is 12 months.

Sacombank also launched a preferential credit package of VND10 trillion with a lower interest rate than normal rates of this bank by 2%. HDBank also deployed a rate-flexible preferential credit package with the interest rate of 6.5% per annum for short-term loans (1-6 months) for corporate customers supplying goods and services to Saigon Co.op. The package is VND10 trillion.

LienVietPostBank launched a retail loan package for businesses with a preferential interest rate 0.5% lower than the normal rate. Accordingly, the bank is expected to set aside VND60 trillion of concessional loans for borrowers directly affected by the Covid-19 epidemic. However, based on actual records, it is likely that only about VND20 trillion will be disbursed to qualified customers.

From February 14, 2020, Military Bank (MB) offered a concessional credit package of VND10 trillion for SME customers. However, in reality, their demand for loans is low. In the context of a complicated, unpredictable pandemic development, businesses are very cautious with new loan decisions, because both supply and demand are troubled.

Manufacturing must keep going on

According to some financial experts, the operation of many businesses is stalled or even stopped, so the demand for loans is not high. Importantly, manufacturing must keep going on. In fact, many businesses want to make goods but they do not have input materials or they want to sell their goods but they cannot find the market. Thus, banks find it hard to offer their loans.

The current difficulty is not about the money market but the stalled commodity market. This support loan package will be effective when the market recovers. At present, for banks, lowering lending interest rates and freezing debts for businesses will be more practical.

For the time being, enterprises are mainly evaluating their business situations to ask banks for rescheduling repayment terms of their outstanding loans. Therefore, since the beginning of March, many banks have primarily restructured loans for their customers.

In the face of urgent difficulties of businesses, the SBV issued Circular 01/2020/TT-NHNN on repayment term restructuring, rate exemption and reduction and debt scheduling to support customers affected by Covid-19. This is considered an important legal corridor for banks to reschedule repayment terms without having to assign loans to other loan groups or increasing bad debts, and facilitating banks to make new loans for effective production and business plans in the coming time.

Although credit growth is still low, many banks expect urgent measures that the Government and ministries have executed to support businesses, together with a large amount of cheap capital offered by banks will help businesses overcome hardships soon and return to borrow more money for continued production and business activities.

Notably, according to economic experts, when the pandemic is over, production and business activities will recover and credit demand will increase rapidly because enterprises will step up their operations to make up for their previous disruptions.

By Quynh Chi, Vietnam Business Form