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Reducing loans to non-production sectors an impossible mission
Commercial banks have been ordered to cut down the outstanding loans to non-production sectors to 22 percent by June 30. However, bankers say this proves to be an impossible mission.
How to take back loans?
Most of the outstanding loans given to fund securities investments have been listed as bad debts. Though commercial banks began putting a brake on securities loans one or two months ago, the outstanding loans to securities investors still account for several percents of total outstanding loans.
The plunge of the VN Index has forced many securities companies to sell stocks out to stop loss and get money to pay bank debts, since they cannot afford the sky high bank loan interest rates. This has helped banks reduce the securities loans by 40-50 percent in April and May 2011.
However, many other securities companies still cannot pay bank debts. With the electronic boards are always lightened red, showing the decreases in the stock prices, this seems to be impossible for the companies to get money to pay debts.
Banks complain that collecting debts from real estate companies proves to be a task which is even more difficult than …“climbing to the sky”. The uncertainties on the real estate market over the last several months make bankers understand that they do not have high hopes to collect debts from the investors who cannot sell products. As the apartment market has been frozen for a long time, investors cannot get money to pay bank debts.
Nguyen Van Duc, Deputy Director of Dat Lanh Real Estate Company, admitted that real estate products have been selling very slowly, including the apartments with medium sale prices. Real estate developers now do not have money to develop projects and pay bank debts.
How much time do bankers need?
Bankers all say that they need some more time to collect debts and cut down the outstanding loans to non-production sectors to 22 percent by June 30, and to 16 percent by December 31, 2011.
Analysts have also commented on Xay Dung newspaper that banks have made every effort to cut down outstanding loans to non-production sectors, but the loans to the sectors remain at over 30 percent of the total outstanding loans. Therefore, they have every reason to believe that the target of 22 percent is beyond the capacity of many banks.
Governor of the State Bank of Vietnam, Nguyen Van Giau, when answering the questions during a TV interview on June 7, said by that time, 20 banks still reportedly had outstanding loans to non-production sectors at above 22 percent. Especially, he said two banks had the proportions at 50 and 52 percent.
Meanwhile, Thoi bao Kinh te Vietnam has quoted its sources as saying “that by the end of February 2011, the outstanding loans given to non-production sectors of the whole banking system had reached 431 trillion dong, accounting for 18.7 percent of the total outstanding loans. Of the 42 credit institutions, 18 had the outstanding loans to non-production sectors accounting for 25 percent and less, while 24 other institutions had higher proportions.”
The analysts have also commented that thee months prove to be a short time for banks to cut down outstanding loans, therefore, this has put a hard pressure on many banks. In order to reach to the finish on time, many banks would have to go too fast, which could be a danger to them.
The State Bank has warned that if banks cannot cut down the outstanding loans to 22 percent by the deadline, they will face punishment. Especially, they may have to pay the compulsory reserve ratio which is two times higher than the normal level, and face restrictions in their operation in the last six months of the year and the whole year 2012.
A banker said that the compulsory reserve ratio of six percent instead of three would not be a big problem to banks. However, this would be really a big problem if banks face restrictions in their operation in the time to come.
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