Sugar loans no sweet deal for banks

The insolvency of sugar and cane businesses that have opened Letters of Credit (L/C) at state-owned banks have forced these banks into lending without knowing when they can reclaim their money, according to Tran Dinh Dinh, vice general director of the Bank for Agriculture and Rural Development (Agribank). The total amount of loans to sugar producers has now reached three trillion dong, in which an amount equal to US$36 million is disbursement from official development assistance (ODA) sources and the rest is the equipment procurement finance acquired via opening L/Cs.

Total lending charge and interest of these loans has reached 700 billion dong. Every year, it costs Agribank over 200 billion dong in interest payments for the money the bank has lent to these sugar producers.

According to an official of the government’s Development Assistance Fund (DAF), the three trillion dong lent is already technically delinquent debt but remain ineligible to be settled under the government’s Decree 48/CP on debt rescheduling and debt forgiveness.

 

Category: Finance