Banks look to balance books

A lack of expertise in appraising investment projects is one core reason driving a number of banks into business reshuffling, merge and acquisition moves on the back of spiraling bad debts, according to a recent investment, finance and banking forum in Hanoi.

At the forum, foreign firms said they found it hard to source loans from Vietnamese banks.

Director Ajay Bhagat at India-based Dutchply Industries Limited said the company wanted to use 180-day letter of credit (L/C) in payment, however only Techcombank rendered the service in Hanoi in 2011.

Bhagat argued usually it took between three to five days for lending process after banks got full documents. However, it took customers around one month to reach the loan.

“Banks and government competent agencies should be willing to take positive changes in the face of current recession. The number of necessary documents and waiting time should be slashed and firms with export value surpassing $2 million a year should be given benefits such as fee reductions to overcome this difficult time,” he said.

Investconsult Group’s general director Nguyen Tran Bat assumed Vietnam finance and banking system incurred imbalances in services capacity as local banks mostly rendered loans whereas their projects’ appraising capacity remained limited.

“Banks may control a portfolio of $10-20 billion, but managing a $10 billion project is by no means simple due to the importance of industrial appraising capacity,” Bat opined, adding that Vietnam has yet to have any organisation qualified enough to control a $10 billion industrial project.

In reality, many local banks incurred a liquidity drought and soaring bad debts after pumping money into risky investments, particularly in property because their governance expertise remained poor.

Thereby, State Bank’s Monetary Policy Department former deputy chief Dr. Nguyen Thi Kim Thanh suggested establishing a specific committee to manage banks’ capital sources whose core function would be to ensure bank capital be distributed in an effective manner.

“Banks must lend to areas and projects generating benefits socially. Besides, it is important to build up effective capital management processes and introduce policies on capital sources management,” said Thanh.