How will the Circular No. 10/2023/TT-NHNN affect credit flow?

Circular No. 10/2023/TT-NHNN, according to ACBS, is part of the Government's policy of supporting the real estate sector in particular and credit expansion in general.

>> Proposed amendments to Circular 06/2023/TT-NHNN

The Circular No. 06/2023/TT-NHNN, which takes effect on September 1, 2023, will supplement a variety of rules designed to limit  risks associated with banks' lending activities, therefore contributing to the safe functioning of Vietnam's banking system.

However, given the economy's continued challenges, the SBV has lately issued Circular 10/2023/TT-NHNN revising Circular 06/2023/TT-NHNN in order to put more importance to promoting economic growth. As a result, instead of taking effect on September 1, 2023, Clauses 8, 9, and 10 of Article 8 of Circular 06/2023/TT-NHNN will be suspended.

Specifically, the capital needs that are not allowed to be satisfied under Clauses 8, 9, and 10 of Circular 06 include (1) to contribute capital, purchase capital contributions of private companies and joint stock companies that have not been registered for trading on UPCOM; (2) to contribute capital under the contract of capital contribution, investment cooperation or business cooperation to implement an investment project that is not eligible to be put into business as prescribed by law and; (3) to refinance, unless specific conditions are met.

Previously, the Ho Chi Minh City Real Estate Association requested to the Prime Minister that the SBV should amend Circular 06/2023/TT-NHNN. Because the subjects stated in Clauses 8, 9, and 10 of this Circular will result in several firms in various sectors of the economy, including real estate enterprises, house purchasers, and investors, having difficulty accessing bank loans.

Meanwhile, bank loans are seen as a "lifesaver" for firms seeking to overcome present challenges, as the corporate bond market is quite bleak and many real estate enterprises have been unable to obtain funds from clients owing to legal issues.

Mr. Ngo Duc Son, General Director of DRH Holdings, stated that the real estate industry has encountered several challenges and delays in legal procedures, causing items to become scarce on the market, prices to rise, and purchasers to suffer. Because capital is a major worry for many enterprises, the Circular No.10/2023/TT-NHNN will be extremely beneficial, removing numerous impediments to meeting the loan demands of many firms. Mr. Son believes that the Vietnam real estate market would rebound as a result of the efforts of the government, ministries, and sectors.

>> Supplement regulations on lending activities: Credit barriers or tighter risk control?

Circular No. 10/2023/TT-NHNN, according to ACBS, is part of the Government's policy of supporting the real estate sector in particular and credit expansion in general. The suspension of the above items will allow real estate businesses that are experiencing difficulties to restructure by transferring capital in projects to developers with better operating capabilities or through business collaboration with other partners.

Furthermore, banks have a legal corridor to lend to real estate buyers who have not yet completed the commercial standards (such as a sales license) but have met the legal requirements. Furthermore, this will help real estate companies finance for investment, extend their land bank, or engage in a new project. This Circular will help the majority of real estate enterprises. However, the real estate companies likely to profit the most include NVL, PDR, and DXG.

Concerning the impact on the banking industry, ACBS believes that the aforementioned modifications will assist maintain loan growth, which has recently been at a low level (up just 4.56% YTD by the end of July and down 0.17% MoM). In truth, each bank will have its own risk appetite and may refuse to actively issue loans for projects deemed high risk. Meanwhile, the newly released Circular will provide a legal corridor and preferential loan disbursement circumstances for banks that favor the real estate industry. Banks having a large share of real estate and construction loans at the end of June 2023 were TCB (35.5%), LPB (31.6%), SHB (27.3%), VPB (22.5%), HDB (19.0%), and MSB (17.9%).