Forex lending to continue next year

Update: November, 28/2018 - 07:00
Outstanding foreign currency loans among local banks is estimated at nearly VNĐ300 trillion (US$12.76 billion). — Photo
Viet Nam News

HÀ NỘI – The State Bank of Việt Nam (SBV) is drafting a new circular on foreign currency lending, allowing credit institutions and foreign bank branches to extend loans to some borrowers in 2019 instead of cutting them off at the end of this year as planned.

Under the draft circular, which aims to revise Circular 24/2015/TT-NHNN, lenders will be permitted to provide short-term foreign currency loans to exporters who need the capital for importing input materials. Borrowers will be required to have sufficient foreign currency revenue from exports to repay the loans.

The short-term loans will be also available to those who need foreign currencies to pay for imported goods and services to serve domestic consumption, with the deadline for loans pushed back to March 31, 2019.

In addition, lenders will be allowed to consider the provision of medium and long-term foreign currency loans for the payment of imported goods and services until September 30, 2019.

According to the SBV, the extension aimed to assist local exporters and producers by reducing the borrowing costs, thereby helping them to enhance their competitiveness in international trade, especially in the context of accelerating global trade protectionism.

Exporters prefer to take out loans in dollars as interest rates for dollar loans is lower than those in đồng. Currently, banks are listing interest rates at 2.8-4.7 per cent per year for short-term dollar loans and 4.5-6.0 per cent for medium and long-term dollar loans. Meanwhile, interest rates are 6-9 per cent per year for short-term đồng loans, and 9-11 per year for medium- and long-term đồng loans.

Experts have also agreed with the SBV’s plan to extend foreign currency lending, saying that it was necessary to support the country’s exports.

Financial expert Nguyễn Trí Hiếu said the Vietnamese economy relied heavily on exports, so exporters needed to borrow foreign currencies at low interest rates to reduce costs and increase competitiveness.

“I support the idea to continue lending in foreign currencies because it is not the right time to end this measure,” said Hiếu.

Expert Cấn Văn Lực said the SBV should consider extending foreign currency lending after December 31 this year since Viet Nam was integrating more with the world and  local demand for foreign currencies was legitimate.

Lực believed that removing foreign currency credit would negatively impact the exchange rate as the proportion of foreign currency loans was relatively small.

It was estimated that outstanding foreign currency loans, mainly in US dollars, of banks, especially State-owned ones, were nearly VNĐ300 trillion ($12.76 billion) by the end of June.

VietinBank topped the list with outstanding foreign currency loans of nearly VNĐ109.98 trillion by the end of June, followed by Vietcombank with VNĐ99.25 trillion and BIDV with VNĐ86.25 trillion.

Some private banks also reported high foreign currency loans, such as Sacombank with VNĐ12.73 trillion, Eximbank with VNĐ10.45 trillion and Techcombank with VNĐ10.1 trillion. — VNS