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Vietnam commercial banks support over 300,000 Covid-19 affected borrowers

May 15, 2020 | 11:53

Commercial banks cut interest rates on VND980 trillion (US$42.6 billion) of loans to aid 318,000 COVID-19 affected individual and corporate borrowers by the end of April, according to the State Bank of Viet Nam (SBV).

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vietnam commercial banks supported 318000 covid 19 affected borrowers
Credit insitutions supported 318 thousand customers (Photo: Bao dau thau)

Until the end of April, credit institutions restructured debt payment time, maintained the debt group for more than 170 thousand customers with an outstanding loan of approximately VND 130 trillion (US$5.6 billion).

Credit institutions also exempted, reduced interest and maintained the debt group for more than 14 thousand customers with an outstanding loan of approximately VND 29 trillion (US$1.2 billion).

Moreover, credit insitutions lowered the existing loan interest rate to over 318 thousand customers with a loan balance of over 980 trillion dong (US$42 billion), reported by Bao dau thau.

The interest rate reduction was commonly 0.5-2 percentage points per year. Some credit institutions even offered a higher rate cut of 2.5-4 percentage points per year.

vietnam commercial banks supported 318000 covid 19 affected borrowers
The interest rate reduction was commonly 0.5-2 percentage points per year (Photo: VnBiz)

It was estimated if the banks cut the rate by 1 percentage points on average for the VND980 trillion (US$42 billion) in loans, their profits will be lowered by at least VND100 trillion (US$4.3 billion).

The SBV has required commercial banks to further simplify lending procedures to help COVID-19-affected firms easily access preferential interest rate loans. However, banks must still meet lending standards to ensure the safety and stability of the financial and banking system.

Some businesses have recently claimed they could not access new loan packages with preferential interest rates due to their failure to meet banks’ lending standards and proposed that banks ease lending rules, reported by VNS.

vietnam commercial banks supported 318000 covid 19 affected borrowers
Banks would not ease lending standards (Photo: Vietnamnet)

Nghiem Xuan Thanh, chairman of Vietcombank, said most companies that could not access the package are inefficiently operating their businesses.

Banks would not ease lending standards, Thanh noted, explaining that the package does not come from the State budget but from commercial banks.

According to Thanh, implementing this support package, the bank is also concerned because it has to mobilize capital and re-lend, while it still has to cut costs and keep operation.

“This explains why there are a number of businesses with unsecured business plans, without capital, cannot access capital. We are ready to share profits, increase digitization to serve faster, but we will not reduce credit standards, because in this environment that will leave a lot of risks", said Mr. Nghiem Xuan Thanh.

Echoing Thanh, Tran Hoang Ngan, head of the HCMC Economic Development Institute, said banks were themselves businesses so they were always afraid of bad debts.

According to Nguyen Quoc Hung, director of the SBV’s Credit Department, in the current situation, it is forecast the bad debt ratio of the banking system will increase this year and negatively affect the country’s plans to deal with bad debts and recover poor-performing banks.

From the perspective of the executive agency, Governor of the State Bank Le Minh Hung said that the credit support is necessary but the authorities must maintain the conditions and standards to ensure safety not only for this period but for the coming years. Hung affirmed that only a safe, healthy banking system will ensure good support for the economy.

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