Businesses get a breather thanks to debt deferral policies

Don't let the "blood clot" of bad debt accumulate.

At the end of April 2023, the State Bank of Vietnam issued Circular 02 regulating the restructuring of loan repayment periods and maintaining loan classifications by credit institutions and branches of foreign banks to support customers facing difficulties, aiming to promptly resolve difficulties and obstacles for business households and enterprises, focus resources on production and business, and increase access to capital.

After a period of implementation, many businesses have given positive feedback on this new Circular from the State Bank of Vietnam. In an interview with Nguoi Dua Tin , Mr. Mac Quoc Anh - General Secretary of the Hanoi Small and Medium-sized Enterprise Association - said that extending or postponing old loans is very important in the current situation, helping businesses reduce some business costs, avoid being reclassified into higher debt categories for new loans, and improve their credit rating.

Furthermore, the company's production and business processes are more stable, helping to address inventory-related issues, which in turn leads to more favorable profit growth.

"In the face of the overall market difficulties, Circular 02 will be helpful for businesses in cement, steel, wood, electricity, as well as the real estate sector, which is considered a 'key driver' of the economy ," Mr. Quoc Anh commented.

According to Mr. Quoc Anh, thanks to Circular 02, businesses can access new loans more easily because their old debts are not added to the list of bad debts.

Mr. Mac Quoc Anh - General Secretary of the Association of Small and Medium Enterprises of Hanoi City.

Debt deferral and extension policies will help businesses overcome capital difficulties to some extent, both in the short term to create a continuous production and business cycle, and in accessing medium and long-term capital sources.

"If the 'blood clot' of bad debt is allowed to accumulate and spread from the real estate and bond sectors to finance and credit, the effect of declining market confidence in real estate businesses has already spread and will continue to spread to all businesses in other sectors. This makes the bond issuance channel unable to help businesses attract short-term investment to solve urgent problems," Mr. Quoc Anh said.

Consequently, the stock market was also strongly affected, exacerbating the capital difficulties faced by businesses. In this context of eroded confidence, depleted working capital, and a lack of investment flows, businesses risk having their assets sold off at a loss.

Therefore, the aforementioned debt deferral and extension policies of the State Bank of Vietnam, in conjunction with the Ministry of Finance 's solutions to address the capital market, are considered timely.

However, according to Mr. Quoc Anh, for these policies to truly be implemented and effectively alleviate the bottlenecks in the economy, it requires the implementation of many synchronized fiscal and monetary solutions, as well as improving market transparency, the business environment, and the competitiveness of the economy and each industry and enterprise.

More solutions needed for corporate bonds

In addition, many real estate businesses believe that, besides Circular 02, there should be another solution to address the current difficulties facing the industry. Regarding the validity period of Circular 02, Mr. Mac Quoc Anh hopes that this Circular will have an extended validity period to maintain the resilience of businesses in particular and the economy in general.

Speaking to Nguoi Dua Tin , a representative of Hung Thinh Group stated that the new regulations are beneficial for both businesses and the real estate market. However, many previously overdue debts may only have been resolved by about 50%. This is because loans from banks only account for about one-quarter of the total debt, while three-quarters is bond debt. Therefore, to address the difficulties faced by businesses, additional solutions regarding corporate bonds are needed.

Therefore, this representative proposed that the State Bank of Vietnam allow commercial banks to provide loans to businesses issuing bonds that are about to mature, for restructuring the debt of those bonds, with the loan amount not exceeding 70% of the value of the issued bonds. At the same time, it suggested allowing bondholders to pledge their bonds as collateral to borrow money from banks up to 70% of the value.

In addition, banks need to expand lending limits because businesses are still having great difficulty accessing capital. In the long term, the government needs to quickly remove legal obstacles for businesses and projects so that products can be brought to market as soon as possible to generate cash flow. When there is cash flow, all the difficulties of businesses will be resolved.

Circular 02 was issued to help businesses have a chance to recover.

"I propose that the State Bank of Vietnam continue to direct commercial banks to consider reducing lending interest rates more effectively and, more importantly, to create favorable conditions for businesses, including real estate businesses and homebuyers, to access credit more easily. It is necessary to allow the application of a similar pilot mechanism for transferring real estate projects under Resolution 42 of the National Assembly on piloting the handling of bad debts of credit institutions, so that businesses can negotiate the transfer of real estate projects according to their needs," this person suggested.

Representatives from Novaland Group also suggested that the State Bank of Vietnam should allow real estate businesses to restructure, extend, or grant grace periods for maturing debts for up to three years without being reclassified into a higher debt category. Credit institutions should consider reducing interest rates and extending bond maturities for real estate businesses for three years to alleviate pressure and increase market confidence .

Source: https://www.nguoiduatin.vn/doanh-nghiep-duoc-tho-nho-chinh-sach-gian-hoan-no-a613325.html