Banks putting shoulders to the wheel

Under Directive 01, commercial banks have to reduce lending rates to non-productive areas to below 22 per cent of their total outstanding loans no later than June 30, 2011. At least 24 commercial banks will have to restructure their lending activities as their current lending rate to non-productive areas reportedly exceeds 26 per cent.

OCB general director Trinh Van Tuan said central banks’ requirements to keep 2011 outstanding loan growth of less than 20 per cent and restrict lending to non-productive areas had largely affected small- and medium-sized banks’ performances, including that of OCB’s.

The bank’s current lending rate to the non-productive area is around 30 per cent. To stay on par with central bank’s requirements, OCB would stop lending to securities and property areas and gradually restrict personal loans, Tuan said.

The personal customer sections director at another bank said the lending rate to non-productive sector at the bank was almost unchanged in the last two months. That was partly due to the high lending rate to this area of 24-25 per cent, per year.

Imposing high lending rates is the way most banks have applied to restrict lending to non-productive areas. However, such a measure is allegedly not strong enough to help banks quickly reduce the share of lending to non-productive areas, particularly for small banks where such rate often stays high. For example, such rate is around 44 per cent at TrustBank by late March 2011.

While small banks raced to restructure lending activities to meet central bank’s requirements, big banks remain calm as lending to non-productive areas at most of them does not stay high, even within the permissible level.

DongA Bank’s general director Tran Phuong Binh said lending to non-productive areas just accounted for 18-20 per cent in total loans at the bank.

At the Military Bank, such rate stood at 17 per cent as of March 31, 2011.

At ACB, lending to non-productive sector made up around 20 per cent by late 2010 and it was pulled down to 18 per cent presently, according to the bank’s deputy general director Bui Tan Tai.

Lately, State Bank governor Nguyen Van Giau issued Document 2956/NHNN-CSTT requiring commercial banks and foreign bank branches to control credit activities in 2011. The governor also asked local commercial banks to send reports about their lending activities to its Monetary Policy Department no later than July 12, 2011.

The document stipulates that in failure to comply with central bank’s requirements, credit institutions will be subject to two-fold reserve requirement against the common reserve requirement ratio and restriction of operational scope for the second half of 2011 and the whole of 2012.