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SBV looks at boosting non-collateral loans

Update: July, 29/2014 - 09:02
The central bank has also urged the Credit Information Centre (CIC), corporate rating agencies, and internal creditworthiness bodies at credit institutions to build up a comprehensive and consistent creditworthiness assessment system.— VNA/VNS Photo Tran Viet

HA NOI (VNS) — The State Bank of Viet Nam has told local branches of foreign banks and rating agencies to improve their capacity of assessing creditworthiness so as to increase non-collateral loans.

The move was made keeping in mind Viet Nam's 12 per cent credit growth in 2014 which is likely to rest on the second half. Banks are struggling to increase lending, which is indicated through a low credit growth of only 2.3 per cent in the first six months.

In the document No 5342/NHNN-TTGSNH dated July 24, the central bank urged commercial banks to employ solutions to help enterprises access more capital to finance production.

SBV wants to see banks actively approach and help companies that are hungry for capital, support them in finalising loan applications, and expand lending for major projects in priority sectors. Priority sectors are agricultural and rural areas, exports, small- and medium-sized enterprises and auxilliary industries.

The central bank has also urged the Credit Information Centre (CIC), corporate rating agencies, and internal creditworthiness bodies at credit institutions to build up a comprehensive and consistent creditworthiness assessment system.

The SBV said that a better creditworthiness rating system will simplify paperwork of loan applications, and improve the capacity of lending enterprises without assets as collaterals.

The efforts to boost non-collateral loans leave bad debts in question.

The bad debt ratio in Vietnamese commercial banks rose in the first half of the year to 4.84 per cent in late June 2014 from 3.61 per cent in late 2013. The SBV reported last week that total bad debts stood at VND240 trillion (US$11.3 billion).

Economists said that the escalating ratio required banks to set up provision funds, which in turn negatively impacted their ability to increase lending activities.

They also largely attributed the increase in bad debts to slow lending growth in the banking system, gloomy performance of corporate financing in the context of the slow paced economic recovery and settlements by the central bank-run Viet Nam Asset Management Company (VAMC) that are below expectations.

According to the Ha Noi Statistics Office, total outstanding loans in July of Ha Noi-based credit institutions are estimated to inch up 0.5 per cent to nearly VND927 trillion ($43.52 billion).

The city's credit institutions are also estimated to mobilise a total VND1,205.6 trillion ($56.6 billion), up 2.8 per cent as compared to June, and up 14.4 per cent year-on-year.

In the same document, the central bank told commercial banks to restructure in-house finance leasing companies pursuant to the master project toward 2015. — VNS

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