Businesses worry about lack of capital

The draft Law on Credit Institutions (amended) is proposing to reduce the total outstanding credit balance for a customer and related persons.

Accordingly, compared to the current law, the draft law has adjusted the total outstanding credit balance for a customer and the total outstanding credit balance for a customer and related persons from not exceeding 15% and 25% to 10% and 15% of the equity capital of commercial banks, cooperative banks, foreign bank branches, people's credit funds, and microfinance institutions, respectively; similarly, it has been reduced from 25% and 50% to 15% and 25% for non-bank credit institutions.

Faced with this information, representatives of many businesses expressed concerns about accessing capital, thereby encountering difficulties in business development and project expansion.

Reducing credit limits: Businesses worry about lack of capital

The leader of a real estate corporation said that if the new regulation is passed, it will have a strong impact on businesses, especially those operating under the model of corporations and general companies, reducing opportunities for businesses to expand production and business.

" Large enterprises operating under the parent-subsidiary model often have many projects being implemented together, each project has a need to borrow capital. If member companies borrow from the same bank, the amount of capital borrowed will be very small, forcing them to divide the need to borrow or arrange for co-financing from many banks for the project to have enough capital to meet the need. This causes many difficulties and obstacles for the business's operations ," he said.

Furthermore, according to this person, the 15% limit applied to the total outstanding credit balance for a customer and the 25% limit applied to the total outstanding credit balance for customers and related persons according to current regulations (Article 128 of the Law on Credit Institutions 2010) are meeting the capital borrowing needs of businesses.

" For the above reasons, I propose to keep the rate as current law ," said the business leader.

Mr. Do Van Bang, Director of Minh Thanh Phat Company Limited (owner of Sao Viet car company) assessed that the purpose of the new regulation to prevent bad debt is good but not really reasonable.

“Currently, banks must be proactive in credit levels, as well as assessing the credit scores of businesses. In essence, banks can accurately assess and evaluate the reputation of customers, including their outstanding loans, so reducing the total outstanding credit balance for customers and related parties is unnecessary.

Not to mention, this also means that businesses easily fall into difficulty when accessing capital," Mr. Bang said.

According to Mr. Bang, at present, there is still a lot of money in the bank, and the banks themselves have to find borrowers. Therefore, the new regulations also make it somewhat difficult for banks to attract 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 business or large project does not receive enough credit capital, it will have to mobilize capital from many other sources, which can easily increase business costs. In addition, businesses having to borrow from many banks and meeting many different conditions of credit institutions can also lead to many risks when business operations are not favorable.

Most business activities of enterprises depend heavily on credit capital provided by banks. (Illustration photo: CAND)

Mr. Pham Ngoc Tung, leader of a wooden furniture manufacturing enterprise, said: "It is necessary to carefully assess the current impacts of the new regulations on the current situation of borrowing capital and risks for enterprises in order to have the most suitable solution, not having too great an impact on the capital flow that enterprises can access, creating conditions for production, business activities and competition."

From an expert perspective, Dr. Nguyen Tri Hieu analyzed: “Tightening credit limits reduces many risks for the economy, avoids lending to backyard corporations, and helps spread capital evenly across the economy. However, backyard banks and businesses can still find ways to circumvent the law. Meanwhile, reducing credit limits can lead to a sudden cut in credit flows, affecting production and business of enterprises."

Dr. Le Dang Doanh, former Director of the Central Institute for Economic Management, also said that in the context of the COVID-19 pandemic not being over for long, the aftereffects and consequences are still great, businesses are still facing many difficulties, especially difficulties in capital, so applying additional credit restrictions will be "more harmful than beneficial".

Previously, when the draft law was brought up for discussion at the National Assembly, Delegate Nguyen Viet Ha (Tuyen Quang) said that changing the credit limit ratio of a credit institution for a customer and related persons needs to have a suitable implementation roadmap to ensure that it does not cause a sudden disruption in the business capital of enterprises, leading to risks for both banks and customers.

The reason is that currently, the business activities of enterprises are heavily dependent on the credit capital provided by credit institutions. In fact, before the adjustment was made, there were enterprises that had almost reached the credit limit ratio ceiling at all state-owned commercial banks.

Not only private economic groups, but also state-owned enterprises implementing key economic projects are at risk of capital shortage.

PHAM DUY-CONG HIEU

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