Businesses Rush to Obtain Dollar Loans

Local businesses rush to ask for dollar loans, following the State Bank of Vietnam (SBV)’s decision to tighten the regulations on lending in foreign currency by credit institutions.

Local businesses rush to ask for dollar loans, following the State Bank of Vietnam (SBV)’s decision to tighten the regulations on lending in foreign currency by credit institutions, effective from May 2, 2012, the state-run online newspaper Phap Luat TPHCM reported.

In nearly 2 months’ time, credit institutions and branches of foreign banks are allowed to provide foreign currency loans only to tSTC borrowers who demonstrate that they will have sufficient foreign currency from production and trading activity for loan repayments. Disqualified firms must get the central bank’s approval in written documents for specific cases.

Domestic companies also seek to borrow dollar-denominated loans as lending rates in the greenback are only 5 percent -7 percent p.a., compared to 16-18 percent p.a. in the dong, said an unnamed bank leader.

Nguyen Duc Thanh, director of the Economic and Policy Research Centre- University of Economics and Business (Vietnam National University, Hanoi), worried that tightening foreign currency lending will lead to cases where ineligible enterprises look to borrow dollars from qualified ones.

“It is very risky to seek borrowings outside financial institutions”, Thanh warned. “This will lead to the formation of another capital market outside the banking system”.

 

Category: Finance