Banks and businesses are not interested in the 2% interest rate support loan package, why?

Businessindustry, banks are not interested

Decree 31/2022/ND-CP on interest rate support from the State budget for loans of enterprises, cooperatives, and business households takes effect from May 20, 2022 with interest rate support capital of up to VND 40,000 billion, expected to be a significant source of support to help enterprises, cooperatives, and business households quickly recover production and business after the pandemic. It is the end of the year, the demand for capital for production and business is increasing, while lending interest rates at banks are about to increase, this interest rate support package is even more meaningful. However, many businesses still turn their backs on this preferential interest rate support package.

Mr. Doan Quang Le - Deputy Director of Trung Do Joint Stock Company said that the implementation of interest rate support loans has many contradictions. The 2% interest rate support policy under Decree 31 is aimed at businesses in difficulty, financial reports must go down,... But in reality, if businesses have difficulties in production and business, banks are not interested in lending because of the risk of bad debt.

High-quality materials production line of Trung Do Joint Stock Company in Nghi Van commune (Nghi Loc). Photo: Nguyen Hai

“The beneficiaries have difficulty meeting the requirements of administrative procedures. The short support period does not solve the difficulties of businesses, spreading out financial support resources. As for customers who are business households, they do not have a business registration certificate and do not meet the conditions for interest rate support... Overall, the policy has not been effective due to lack of consistency and impracticality,” said Mr. Le.

Many businesses and banks believe that the policy objectives are very good, but the implementation is contradictory and overlapping, so the implementation is not as expected. The State supports interest rates, but the loans are from commercial banks, and banks must evaluate customer records and bear the risks. Both businesses and banks are afraid of inspections and audits during the implementation, implementation of estimates, and settlement of interest rate support.

Mr. Vo Huy Ha - Director of Vietinbank Cua Lo branch said that most businesses signed loan contracts at the beginning of the year, and if they want to borrow a new package, they have to wait for the contract to be liquidated at the end of the year. Currently, at Vietinbank Cua Lo branch, there is no outstanding debt of the 2% interest rate support program.

Evaluating the loan package, Mr. Ha said, “We know that some businesses are eligible but refuse to borrow; they are not enthusiastic because they are afraid of inspection and examination. To borrow interest-supported loans, businesses must have a report on the impact of the Covid-19 epidemic, and have a feasible business recovery plan for the following year. However, who will evaluate whether they recover or not, and by what standards…?

“This assessment is highly qualitative, which is very unsafe, banks cannot be flexible with support programs from the State budget. The lesson from lending for shipbuilding under Decree 67 is still there” - Mr. Ha shared.

Transaction at HDBank. Photo: Thu Huyen

In addition, many businesses have production and business activities in many different industries and fields, making it difficult for banks to separate costs, leading to difficulties in supporting loans. Meanwhile, the criteria for determining recovery capacity set by commercial banks are not consistent, easily leading to disagreement from the inspectorate, and not being able to settle support costs.

Discussing this issue, Ms. Nguyen Thi Thu Thu - Director of the State Bank said that the banking industry is always ready to listen, accompany, and support businesses in accessing financial services, and banks to develop production. However, the industry's viewpoint is that the money lent out must be collected, ensuring the safety of capital sources.

Some businesses say it is difficult to access the Government's interest rate support package, but to receive support, they must prove that they are affected and have the ability to recover; multi-industry businesses must separate their industries in the support list. For business households, to receive interest rate support, they must have a business registration and actual business, but in reality, many households have registered but do not generate taxes...

Ms. Nguyen Thi Thu Thu - Director of State Bank of Vietnam, Nghe An branch

Ratiolow disbursement rate

Aiming to remove difficulties for people and businesses affected by the Covid-19 epidemic, in addition to management solutions, the Government has many support packages for businesses.

Decree 31/2022/ND-CP dated May 20, 2022 on interest rate support from the State budget for loans of enterprises, cooperatives, and business households is considered a large-scale State budget policy implemented through the commercial banking system. This policy is implemented with the aim of supporting the reduction of loan costs of enterprises, cooperatives, and business households to overcome difficulties, stabilize and develop production and business, creating a foundation and driving force for economic development.

The interest support period is calculated from the date of loan disbursement to the time the customer fully repays the principal and/or interest according to the agreement between the commercial bank and the customer, in accordance with the announced interest support funding source, but not exceeding December 31, 2023.

Trong Phuc Garment Company Limited in Dien Chau district borrows capital from the interest rate support program of the Vietnam Bank for Social Policies for production and business. Photo: Thu Huyen

Loans with interest rate support must meet normal loan conditions, be signed a loan agreement and disbursed within the period from January 1, 2022 to December 31, 2023, use capital for the right purpose, and have not received interest rate support from the State budget under other policies.

However, for many reasons, the disbursement rate of the Government's 2%/year interest rate support package of up to VND40,000 billion is currently very low.

After more than 4 months of implementation, the loan sales with interest rate support reached nearly 4,407 billion VND for nearly 550 customers; the amount of interest rate support for new customers reached more than 13.5 billion VND, the disbursement rate was only about 0.03%, not as expected.

In Nghe An, by the end of October 2022, the 2% interest rate support loan program from the State budget of VND 40,000 billion was implemented, the outstanding loan with interest rate support was nearly VND 809 billion at 6 commercial bank branches. According to feedback, banks were not enthusiastic and businesses were not interested even though the demand for capital for production and business was not small.

This interest rate support program is large-scale, deployed nationwide, with many commercial banks participating. To implement effectively and create a spillover effect on the economy, together with the State Bank, it is necessary to have strong participation from ministries, branches, central and local agencies, commercial banks, customers, and continue to coordinate closely to synchronously implement the tasks assigned in Decree 31/2022/ND-CP.