A bank employee in Ho Chi Minh City stacks money. PHOTO: DIEP DUC MINH
Despite being very much in the black, Ho Chi Minh City banks remain reluctant to lend to the country's untrustworthy businesses, they announced during a Monday meeting with the central bank and city legislators.
Economist Tran Du Lich, deputy head of the city legislature, told Tuoi Tre that banks have an economic obligation to rescue the large number of small and medium-sized enterprises that are mired in bad debt that still have the potential to recover.
A representative from state-owned Agribank said it’s aware of many businesses that will go under without further funds, but there's no guarantee that the money can save them.
He said those businesses are not in a position to borrow, based on national rules and lending to them would put banks at risk.
“Though we really want to, we don't dare lend to them. It’s time to be extremely cautious,” he said.
Phan Huy Khang, general director of Sacombank, said it’s hard to pick out a potential winner among the struggling businesses.
“We’ve considered several businesses very hard but still don't dare to lend them money as they lack sufficient collateral and their business plans seem unreasonable.”
Khang said his bank recently cut loans to seafood and rice investors in the Mekong Delta as “they're too risky.” The product prices depend largely on the manipulation of middlemen.
Do Minh Toan, general director of Asia Commercial Bank (ACB), said banks don’t just unilaterally cut loans, but base those decisions upon the falling value of borrower’s mortgaged property.
Do Duy Hung, general director of Viet Capital Bank, said businesses have been holding money with loose hands and have failed to implement proper plans.
He added that the banks are hardly being perfectionists, but they’ve seen how businesses can scatter their investments.
Banks are borrowing from the central bank at an interest rate of 6.52 percent a year and lending at an average of 10.58 percent, he said, profiting little from long and middle-term loans.
They are not raising rates to keep old customers, but they need to choose new customers carefully.
Banks say they are determined to stay away from bad debt after they received little support when things got messy.
The Agribank representative said that banks can do nothing with collateral put down on non-perfoming loans until the borrower signs off on it.
He said the bank has had to bring some borrowers to court after their debts grew beyond their collateral.
At times, they didn't show up to court, preventing judges from rendering a verdict.
“Some cases still haven't gone anywhere after three years,” he said.
Nguyen Dinh Tung, general director of Eastern Bank, said some borrowers have dragged things out by selling their collateral assets to third parties.
Some go into hiding, forcing banks to spend a year asking police to track them down and drag them into court.
During the recent meeting, the city's central bank branch announced that the city banks' bad debts had fallen to VND46.6 trillion by the end of March, or 4.85 percent of all loans.
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