The draft Law on Credit Institutions (amended) proposes reducing the total outstanding credit limit for a customer and related parties.
Accordingly, compared to the current regulations, the draft law has adjusted the total outstanding credit limit for a single customer and the total outstanding credit limit for a single customer and related parties, respectively, from not exceeding 15% and 25% to 10% and 15% of the equity capital of commercial banks, cooperative banks, branches of foreign banks, people's credit funds, and microfinance institutions; similarly, it has reduced it from 25% and 50% to 15% and 25% for non-bank credit institutions.
Following this news, representatives from many businesses expressed concerns about accessing capital, which could hinder business development and project expansion.
Lowering credit limits: Businesses worry about capital shortages.
The leader of a real estate group said that if the new regulations are passed, they will have a strong impact on businesses, especially those operating under a corporate or conglomerate model, reducing their opportunities to expand production and business.
" Large businesses operating under a parent-subsidiary model often have many projects underway, each requiring capital loans. If the subsidiary companies borrow from the same bank, the amount of capital that can be borrowed will be very small, forcing them to split their borrowing needs or arrange co-financing with multiple banks for the project to meet the capital requirements. This creates many difficulties and obstacles for the business's operations ," this person said.
Furthermore, according to this expert, the 15% limit applied to the total outstanding credit balance granted to a single customer and the 25% limit applied to the total outstanding credit balance granted to customers and related parties, as stipulated in current regulations (Article 128 of the Law on Credit Institutions 2010), are meeting the borrowing needs of businesses.
" For the reasons above, I propose maintaining the current ratio as stipulated in the law ," the business leader said.
Mr. Do Van Bang, Director of Minh Thanh Phat Co., Ltd. (owner of Sao Viet car company), assessed that the purpose of the new regulation to prevent bad debts is good, but not entirely reasonable.
"Currently, banks must be proactive in managing credit levels and assessing the credit scores of businesses. Essentially, banks accurately assess the creditworthiness of their customers, including their outstanding debt, so reducing the total outstanding credit balance for customers and related parties is unnecessary."
"Furthermore, this also means that businesses are more likely to face difficulties in accessing capital," Mr. Bang said.
According to Mr. Bang, currently there is still a large amount of money in banks, and the banks themselves are actively seeking borrowers. Therefore, the new regulations are somewhat hindering banks in attracting customers.
Similarly, Mr. Hoang Van Oanh, Chairman of the Board of Directors and Director of Tien Thanh High-Tech Agricultural Cooperative (Tuyen Quang), shared that if a large enterprise or project does not receive sufficient credit capital, it will have to raise funds from many other sources, which can easily increase business costs. In addition, the fact that businesses have to borrow from multiple banks and meet various conditions of credit institutions can also lead to many risks when business operations are not going smoothly.
The majority of business operations depend heavily on bank credit. (Illustrative image: CAND)
Mr. Pham Ngoc Tung, the leader of a wood furniture manufacturing company, said: "A thorough assessment of the current impacts of the new regulations on the current borrowing situation and risks for businesses is needed to find the most appropriate solutions, without significantly impacting the capital that businesses can access, creating favorable conditions for production, business operations, and competition."
From an expert's perspective, Dr. Nguyen Tri Hieu analyzed: "Tightening credit limits reduces many risks for the economy , prevents lending to crony corporations, and helps distribute capital evenly throughout the economy. However, banks and crony businesses may still find ways to circumvent the law. Meanwhile, reducing credit limits could lead to a sudden cut in credit flow, affecting the production and business of enterprises."
Dr. Le Dang Doanh, former Director of the Central Institute for Economic Management Research, also believes that in the context of the COVID-19 pandemic, which has only recently passed, with its lingering effects and consequences still significant, and businesses still facing many difficulties, especially in terms of capital, imposing additional credit restrictions would be "more harm than good."
Previously, when the draft law was discussed in the National Assembly, Representative Nguyen Viet Ha ( Tuyen Quang ) argued that changing the credit limit ratio for a credit institution to a customer and related parties needs a suitable implementation roadmap to ensure that it does not cause a sudden disruption of the working capital of businesses, leading to risks for both banks and customers.
The reason is that currently, the business operations of enterprises depend heavily on credit capital provided by credit institutions. In fact, even before the adjustment to reduce credit limits, some enterprises had almost reached the ceiling of the credit limit at all state-owned commercial banks.
Not only private corporations, but also state-owned enterprises implementing key economic projects are at risk of capital shortages.
PHAM DUY-CONG HIEU
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