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SBV concerned over lending to risky sectors
The Saigon Times Daily
Wednesday,  Sep 19, 2018,14:41 (GMT+7)

SBV concerned over lending to risky sectors

The Saigon Times Daily

A bird’s eye view of HCMC. The State Bank of Vietnam has expressed concern over the increasing credit for risky sectors including real estate – PHOTO: THANH HOA

HCMC – Although credit growth and lending to risky sectors are kept under control, the State Bank of Vietnam (SBV) has expressed concern over the increasing credit for the real estate sector and build-operate-transfer (BOT) and build-transfer (BT) traffic projects, reported Sai Gon Dau Tu Tai Chinh newspaper.

According to SBV, the outstanding loans of credit institutions reached VND6,700 trillion (US$288.2 billion) in the first five months of the year. Of this amount, credit for the real estate sector and BOT and BT traffic projects increased by 3.65% and 3.58% over late last year and accounted for 6.41% and 1.6% of the total outstanding loans, respectively. Meanwhile, credit for securities was down 9.61% in the five-month period and made up a mere 0.33% of the total.

The figures did not include loans for real estate projects and securities disguised in consumer credit.

In Vietnam, lending to the real estate sector has posed a high risk for banks as the prevailing regulations are not sufficiently strict. In addition, investment in the property sector can help generate high profits, leading to speculation and an imbalance between supply and demand in different segments, especially the high-end segment.

Meanwhile, the settlement of bad debts related to property projects being used as collateral has seen numerous shortcomings and falls under the jurisdiction of multiple ministries, agencies and localities.

As for BOT and BT traffic projects, credit institutions have found it difficult to recover their capital as the State’s toll fee collection policies are unstable. These projects often require heavy investment with a long repayment period, while credit institutions tend to offer short-term loans.

In addition, many investors in BOT and BT traffic projects have poor financial capabilities and are unlikely to repay the loans if an unforeseen incident arises.

The central bank also called for local banks to clearly verify the purposes and borrowers of consumer credit to reduce the number of loans approved for the real estate sector through this line of credit.

The Government, at its monthly meeting last month, also asked SBV to strengthen control over loans for the real estate sector. SBV has taken steps to control credit growth, prioritize pumping capital into production and business activities and tighten credit for risky sectors such as real estate and securities as well as BOT and BT traffic projects to ensure the stability of the banking system.

At first, SBV will allow banks to use only 40% of their short-term capital for long- and medium-term loans from early next year, instead of 45% as was previously permitted.

According to VNDIRECT Securities Corporation, some commercial banks have gradually cut down on loans for housing projects by imposing tougher requirements on firms that request these loans.

Besides this, banks tend to offer loans to consumers in need of buying houses rather than real estate companies due to the reduced risk and higher profits.

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