Banks having a huge surplus of funds should help business in dire need of capital and both sides should work together to ease the current economic problems, said chairman of the People’s Committee of Ho Chi Minh City Le Hoang Quan.
Decrease in capital safety index
|Credit transactions in a bank (Photo: SGGP)|
According to Nguyen Ngoc Thang, deputy director of the HCMC branch of the Central Bank, till May this year, the total capital mobilization in banks reached VND907,100 billion (approx. US$43,195 million), an increase of 1.5 percent compared to the end of 2011.
However, various businesses in the city are now facing difficult times, what with excessive inventory and overdue or bad debts. Having no effective solution to their problems, many of their safety indexes have declined steeply.
Receiving no detailed instruction or regulation from the Central Bank on giving new loans to pay back old ones, plus having difficulty acknowledging the health of these businesses, banks are not daring to approve new loan applications.
Since old outstanding loans used real estate as collateral (unsure guarantees these days) new credit limits are also not readily available.
Tran Minh Tuan, Deputy Governor of Central Bank, said that since the issue of Circular No.14 last month to regulate four specific groups namely agricultural organizations, small and medium size businesses, supplier industry for loan applications, about VND7,000 billion (US$333 million) has already been delivered to 420 companies. This is just a small number of all the total businesses in dire need of capital in HCMC.
Pointing out that reasons such as a weak financial state, huge inventory, unclear books, or no collateral - refusing loan applications will simply worsen the situation, said Deputy Governor Tuan, who recommends that the government should provide better loan regulations to rescue any firm from the brink of bankruptcy. He stated that besides attractive interest rates, it was wiser to control only outcomes rather than subjects of loans.
Cooperation between banks and businesses
According to Tran Phuong Binh, President of Dong A Bank, at the moment, most banks, particularly renowned ones, have surplus funds and wish to reduce interest rate to attract more customers. “With the raising of interest rate of 11 per cent per year and lowering lending interest rate--sooner or later we will have to close our banks,” said President Binh.
Suggesting that the People’s Committee of Ho Chi Minh City should talk with associations of industries to make a specific list of anyone in need and the exact capital required, he stated that all banks willingly gave out loans despite high risks and asked that the public not blame banks for not offering assistance.
Agreeing with Binh’s stance, Truong Van Phuoc, President of Eximbank in HCMC, said that the Central Bank should widen the loan subject list to decrease the lending rate. Eximbank alone is willingly giving VND5,000 billion credit (US$238.1 million) with a lending rate of 13-14 per cent per year.
Referring to Do Minh Toan views, the Vice President of Asia Commercial Bank (ACB) said that the government should focus on unblocking suspended apartment plans. All banks have available credit for anyone wishing to buy a house under the social policy programme.
The last thing to do is call for investors and contractors to lessen their own benefits and reduce apartment prices. “Despite the lending rate of only 15.5 per cent per year for housing, ACB cannot deliver credit as house prices are still rather high,” said Toan.
Deputy Governor Tuan has demanded that the association of each industry must urgently provide a list of businesses in need of capital to an appointed bank, so that this economic debacle is avoided in the near future.
At the end of the meeting, Chairman Le Hoang Quan instructed related agencies and associations in HCMC to quickly create a list of unhealthy businesses so that the People’s Committee can cooperate with banks to provide appropriate and timely support.
In June, commercial banks in the city are expected to give out VND30,000 billion credit (US$1,429 million) to support businesses.