Adjust the credit line to the right address

Credit demand will continue to be high thanks to the recovery momentum of the economy. Photo: Internet

Preferential interest rates

At this time, businesses still have to produce and find orders to make up for the delays because of social distancing. In that busy atmosphere, businesses are always worried about resources, capital, and costs to not only spend on investment and business activities but also ensure the lives of employees.

Mr. Nguyen Vinh Yen, General Director of Dahatsu Company (North Thang Long Industrial Park, Hanoi) said that returning to the "new normal phase", the company has made efforts to reproduce, looking for orders even though there are still many difficulties in terms of raw materials.

But the most worrying thing is that the cash flow has been interrupted for a while, so the company is expected to lack more than VND500 billion to maintain its operations. Fortunately, after working with a commercial bank, the company was given capital with a preferential interest rate of 8%/year and disbursed in three installments depending on the production capacity and output of the order. With this support, Mr. Yen forecasts that the company will continue to recover, increase production and supply products to the market.

In fact, banks have been launching preferential loan packages with low interest rates for enterprises, especially those in priority fields. Commercial banks have also increased the rate of unsecured loans or accepted collateral as sources of future income to support businesses, especially small and medium enterprises affected by the Covid-19 pandemic.

Talking about interest rates, Mr. Pham Chi Quang, Deputy Director of the Monetary Policy Department (SBV), said that lending interest rates have tended to decrease in recent years. In 2020, the lending interest rate has decreased by an average of 1%/year, by the end of November 2021; the lending interest rate will continue to decrease by 0.82%. With five priority areas, the ceiling lending interest rate in VND regulated by the State Bank is 4.5%/year, but the real interest rate that banks are lending is about 4.3%/year on average. This figure is much lower than the ceiling set by the State Bank of Vietnam, much lower than the common level of lending interest rates of ASEAN4 countries and some countries with similar economies.

Previously, banks also applied for an extension of the credit growth limit  to have more room for lending. According to banks, it is very important to be granted additional credit quotas, because, in the absence of additional limit s, many banks that hit the top will not be able to continue lending.

Manipulating the flow

The latest data from the State Bank shows that, as of December 28, credit to the economy increased by 12.97% compared to the end of 2020 and is expected to reach 14% by the end of the year. With this figure, about VND1.19 quadrillion has been injected into the economy in 2021. In particular, credit flows continue to be directed by the SBV into priority areas and at the same time strictly controlled credit in potentially risky fields such as real estate, securities and BOT projects.

Experts also forecast that, in 2022, credit demand will continue to be high thanks to the recovery momentum of the economy. However, interest rates are still facing a lot of upward pressure due to global inflation. Therefore, businesses are putting a lot of expectations on the 4% interest rate compensation package with a scale of VND40,000 billion.

According to Mr. Pham The Anh, Head of the Department of Macroeconomics, National Economics University, this interest rate support package must be attractive enough but it must also limit  taking advantage of policy loopholes, which can lead to mistakes like the 2009 support package, this is no small challenge. Moreover, in order to get credit to the right purpose, ministries and branches need to coordinate to identify affected industries, thereby implementing targeted policies with clear goals and monitoring.

Another problem is it is difficult to access normal credit packages as well as preferential credit packages as the banking industry will not lower credit standards. Representatives of banks often say that banks are also businesses, if lending has potential risks and businesses cannot repay, the responsibility belongs to banks.

Therefore, in the future, the State Bank said that it will direct credit institutions to safely and effectively grow credit, control and handle bad debts; directing credit to production and priority fields according to the Government's policy; strictly controlling credit in potentially risky areas. In addition, the banking industry will continue to implement solutions to support people to access bank credit and solutions to remove difficulties for customers affected by natural disasters and epidemics.