Deputy Governor of the State Bank of Vietnam Dao Minh Tu speaks at the conference. (Photo: PV/Vietnam+)
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At the online conference on boosting bank credit in 2024 held on February 20th, the leaders of many commercial banks proposed that the State Bank of Vietnam extend Circular 02/2023/TT-NHNN on debt structuring and loan rescheduling for another 6 to 12 months to provide both customers and banks with a more favorable condition for debt repayment.
Consensus on extending Circular 02
Mr. Ho Nam Tien, Chairman of the Board of Directors and CEO of Lien Viet Post Joint Stock Commercial Bank (LPBank), stated that LPBank has restructured approximately VND 2,500 billion of debt in accordance with Circular 02. However, it is still difficult to repay the debt by the deadline of Circular 02 on June 30th. Therefore, LPBank and other banks hope that the State Bank of Vietnam will extend the deadline.
This issue has also been raised by representatives of many banks at the conference and previous meetings.
Mr. Do Thanh Son, Deputy CEO of VietinBank, commented: “Customers will continue to face difficulties in the beginning of 2024 and until the beginning of 2025, so it is necessary to extend Circular 02 on debt structuring and keeping the debt category unchanged.”
In addition, Mr. Son also proposed specific provisions for setting aside reserves for restructured medium-term debts that have kept the same debt category. According to him, for the installments that this customer group has already paid off, there is no need to set aside additional reserves because the medium-term loan period is still ongoing.
Mr. Pham Quang Thang, Deputy CEO of Techcombank, also stated that Techcombank’s non-performing loans at the end of January 2024 remained the same as at the end of 2023, with a ratio of 1.2%.
In terms of debt structuring for customers at Techcombank in accordance with Circular 02, at the end of January 2024, the bank has restructured approximately VND 6,000 billion of debt, and customers have begun to repay the debt gradually. However, according to Mr. Thang, to provide more time for businesses to repay the debt, Techcombank also proposed an extension of the deadline for debt restructuring and repayment under Circular 02.
Mr. Tran Long, Deputy CEO of BIDV, also believed that the expiration of Circular 02 on June 30th, 2024 would create significant pressure on debt repayment for businesses, while the treatment of bad debts of credit institutions also faced difficulties. Therefore, BIDV representatives proposed extending the application of Circular 02 until the end of 2024.
Regarding the proposals from credit institutions, Deputy Governor Dao Minh Tu also believed that it is necessary to consider extending Circular 02, but the extension period of 6 months or 1 year needs to be carefully reviewed.
Mr. Tu also suggested that the Credit Department of economic sectors, the Inspectorate, the Legal Affairs and Policy Department of the State Bank of Vietnam propose and issue this mechanism in the first quarter of 2024.
Why is credit growth decreasing?
At the same conference, the leaders of commercial banks explained the reasons for the low credit growth in the first few months of the year.
Mr. Nguyen Thanh Tung, CEO of Vietcombank, stated that in January 2024, the bank’s credit decreased by 2.3% compared to the end of 2023, equivalent to a decrease of VND 30,000 billion. Specifically, wholesale credit decreased by VND 19,000 billion and retail credit decreased by VND 11,000 billion.
The reason is the continued decline in consumer credit and real estate credit since 2023. The difficult economic situation, declining people’s incomes, the sluggish real estate market, few newly licensed real estate projects in 2023, and many legal obstacles are still hindering the real estate market. The difficult global economic context, reduced demand, and decreased export orders have also contributed to the low demand for bank capital.
Mr. Nguyen Thanh Tung, CEO of Vietcombank speaks at the conference. (Photo: PV/Vietnam+)
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In addition, the low credit growth at Vietcombank is also due to some specific factors of the bank. Specifically, short-term wholesale credit accounts for a large proportion of Vietcombank’s total outstanding loans (70%), and loans for international payments and seasonal commercial financing are usually concentrated before the Lunar New Year. The demand of export-oriented businesses and FDI businesses also experiences a sharp decline at the beginning of the year (FDI businesses tend to repay their loans at the end of the year for settlement purposes).
“The decrease in credit in January and February every year is normal and it will increase again in the coming months. At the end of the first quarter and the beginning of the second quarter of 2024, credit for businesses and individuals will rebound,” Mr. Tung commented.
According to Vietcombank leaders, at present, interest rates are no longer an obstacle to credit growth because the lending interest rates are low, even lower than during the COVID-19 period.
Similarly, Mr. Pham Toan Vuong, CEO of Agribank, also stated that due to the large number of individual customers, Agribank’s credit tends to decrease at the beginning of the year but experience strong growth at the end of the year.
“At the beginning of this year, Agribank’s credit decreased significantly, over 1%, but it is expected to grow by 5-6% by the end of the second quarter,” Mr. Vuong said.
Leaders from BIDV also mentioned that credit has decreased by about VND 25,000 billion. The main reason is the difficult economic situation. The driving forces of production, consumption, and exports are facing many difficulties, and export orders are declining. While newly registered businesses have only seen a slight increase, the number of businesses temporarily suspending operations has increased by 25% compared to the same period last year.
In private joint stock commercial banks, Mr. Pham Nhu Anh, CEO of Military Bank (MB), said that credit in January 2024 also decreased by 0.7%. The main reason is low credit demand and low capital absorption capacity.
“The question is for what purpose the loans are used. We talked a lot about real estate last year, but the situation is still difficult. We are in the process of solving the difficulties, but the results are rare. We propose that the State Bank of Vietnam coordinate with the real estate market to avoid affecting real estate consumer loans in 2024,” Mr. Anh suggested.
Credit decreases in the early months of the year. (Photo: Vietnam+)
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In his concluding remarks at the conference, Deputy Governor Dao Minh Tu posed the question: Is the decrease in credit in the early months of the year due to trends, laws, or other reasons?
“Interest rates are always a matter of concern. If they are too low, it is not good either because interest rates must be in line with the general indicators of the economy, especially the exchange rate. But have interest rates for previous loans decreased?”
Therefore, Deputy Governor Tu emphasized that commercial banks must announce average interest rates for short-term, medium-term, and long-term loans so that individuals and organizations can understand.
Mr. Tu further emphasized that for consumer credit, although there are still difficulties, banks need to promote lending in this area. Because only by promoting consumer credit can purchasing power be stimulated, credit can be strengthened, and economic growth can be boosted.
In particular, by promoting legitimate consumer credit from banks and financial companies, the “black credit” that is currently rampant can be curbed. However, it is necessary to control the risk of bad debts, especially in the context of the current difficult market.
Thuy Ha
