Vietnam banks struggle to lower non-manufacturing sector loans

Six of 17 banks in Ho Chi Minh City are struggling to slash credits for non-productive sectors to 22% of their total outstanding loans.

The central bank’s HCMC branch director Ho Huu Hanh said those banks had been trying to reduce the proportion of non-manufacturing sector credits, but they looked unable to take back real estate loans before maturity while loans for stock investments were not easy to retrieve due to the gloomy securities market. He declined to reveal the names of the six banks.

Banks have been rushing to take back their loans for non-manufacturing sectors and have stopped extending new loans so as to bring down the proportion to 22% by June 30 and 16% by December 31 this year as ordered by the central bank. Nevertheless, it is not easy for the lenders that lent big to the real estate sector in previous years.

The general director of a bank based in District 1 said that the proportion for non-productive sectors at his bank would still be 31% by end-June and would not be less than 28% at the end of this year although it had tried to redeem as many loans as it could. Many customers have refused to repay loans prior to maturity, he explained.

Another solution is to dilute such loans by mobilizing more funds, but it is difficult to attract deposits at the moment. Therefore, “it is certain that the bank cannot increase loans for manufacturing sectors to reduce the proportion of credits for non-manufacturing customers,” he said.

Many banks complained the central bank asked them to lower the proportion of loans for non-manufacturing sectors in short notice.