Loan classification takes a back seat

The State Bank has just released the Circular 12/2013/TT-NHNN amending some articles of the Circular 02/2013/TT-NHNN providing for loan classification and provisioning risks.

Accordingly, the Circulate 02 will take into effect from June 1, 2014 instead of June 1, 2013.

According to the State Bank, the delay will create favourable conditions for enterprises to access bank loans, lower interest rates and remove difficulties for manufacturers.

Previously, some industry insiders and economic experts expressed concern about whether June 1 was a suitable time for this circular's enforcement.

Sacombank director Phan Huy Khang said Circular 02 would help banks come on par with international standards. But, Khang said this was too challenging now considering the banking sector's weak credit growth and surging bad debts.  

This year, Sacombank set its bad debt target at 3 per cent against 2 per cent last year after factoring on the possible application of the Circular 02. Khang said he hoped the circular would take effect  later.

Oriental Commercial Bank director Nguyen Dinh Tung said that  enforcement of the Circular 02 would make it more difficult for firms to access loans.

Tung argued that credit organisations applied different debt classification standards towards the same customer. In light of the Circular 02, borrowers will be classified at highest level and unified throughout the system, thereby many current customers would stop getting capital infusions from banks if the Circular 02 became effective, he said.

Economist Vu Dinh Anh said application of the Circular 02 would lead to remarkable a hike in banks' bad debts and directly affect their network expansion.