Vietnam - Businesses hesitant with banks' suggestion on rollover

A lot of businesses have shown their hesitation when their creditors -commercial banks -ask them to borrow money elsewhere to pay bank loans, promising to provide new loans after the debt payment.

Governor of the State Bank of Vietnam Nguyen Van Binh, in a recent meeting with local press, said that commercial banks would consider restructuring the loans granted to businesses, which are meeting temporary difficulties but can prove the capability of paying debts in the near future.

Deputy general director of BIDV Pham Quang Tung said that the bank would restructure the loans by extending the payment deadline and re-defining the payment schedule, considering providing medium and long term loans, and applying other possible measures.

Together with the debt restructuring, Tung said BIDV would consider reducing the lending interest rates. The businesses which can seek capital from other sources to pay bank debts would be able to get new loans at the low interest rates of 14-15 percent per annum.

Meanwhile, Nguyen Duc Huong, deputy President of Lien Viet Post Bank, said the bank would consider the total accounts payable, irrecoverable debts and the businesses' capability in capital, and sales contracts to decide the next steps for the loan restructuring.

He has affirmed that only the businesses that meet temporary difficulties but still have the capability to pay debts would be able to enjoy the debt restructuring.

A manager of another joint stock bank has also said that if businesses can prove that they have products for sale to get money for debt payment, they would be able to access other loans. Even real estate developers can also borrow money, if they can sell most of the products and they need money to complete the projects.

Dr Tran Hoang Ngan, a Member of the National Advisory Council for Finance and Monetary Policies, has affirmed that there are many capable businesses which still have fallen into big difficulties in the context of economic downturn. The businesses need the debt restructuring that helps them survive and earn money to pay bank debts.

However, the debt restructuring has raised worries about the higher risks banks would face.

The State Bank on April 10, 2012, released a document requesting credit institutions to re-schedule the debt payment deadline for businesses.

However, to date, most of the banks still keep hesitant to restructure debts for fear of the risks. A lot of banks have begun restructuring debts by allowing rollover.

In the past, making rollover was considered a "taboo" in the banking operation, because this may conceal the real situation of borrowers -businesses.

Ha Anh, the owner of a big restaurant in Hanoi, said that in mid April, she had to fly to HCM City to deal with the overdue debt worth 500 million dong. A bank executive told her to borrow money elsewhere to pay the due debts. The bank promised to complete the procedures to re-lend the sum of money to Anh after three days.

"I tried to persuade them that my difficulties are just temporary, and that the restaurant still can perform well, but I failed. Then I had to borrow money on the black market at the exorbitant interest rate of 5 percent per month to pay the matured debts.

After that, I borrowed money from another bank at lower interest rate," Anh said.

Nguyen Van Tan, deputy director of an animal feed manufacturing company, also said the bank urged him to borrow money from other sources at the interest rate of 20 percent to pay the matured debt worth 1.2 billion dong. The bank promised to lend Tan another sum of money at the interest rate of 16.5 percent per annum.

However, Tan said he would rather bear high interest rates as punishment for the delay in debt payment. He fears that the bank would break the promise and not to lend money again.

VietBiz24

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