SBV allows foreign currency lending to continue through 2015

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Accordingly, credit institutions including foreign bank branches, can continue providing short-term foreign currency loans to petroleum-importing enterprises and export companies in need of capital for their manufacturing and trading of exported commodities through December 31, 2015. This circular has replaced another issued last year that was void on December 31.

In particular, forex-licensed banks can grant foreign currency loans to borrowers with capital needs. Petroleum businesses that require foreign currencies to pay for their imported petroleum or companies that need foreign currencies for the manufacture and trade of commodities used for export can take out short-term loans.

Prior to this circular being issued, some experts stressed that there was no need to restrict or stop foreign currency loans since businesses that meet the terms and conditions for these loans generally make sales in foreign currencies and therefore use this financing to balance their flow of capital and save on costs.

According to SBV’s Deputy Governor Nguyen Thi Hong, to achieve 6.2 per cent GDP growth in 2015 the SBV needs to support the corporate sector by providing plausible solutions. Therefore the SBV has ensured that credit institutions can continue offering short-term foreign currency loans through the end of this year.

The extension will help businesses minimise their borrowing costs since the forex market is considered stable and the foreign currency lending rate is lower than the VND lending rate. Also, it is expected to help banks expand their credit growth in accordance with the SBV’s target.

Outstanding foreign currency loans for the permitted enterprises currently account for nearly 30 per cent of total outstanding foreign currency loans in the banking system. Petroleum enterprises amount to 6 per cent while export businesses make up the other 24 per cent.

As well as these businesses, the new circular also allows borrowing by import firms and businesses that have licensed overseas investment projects.

The circular took effect on January 1 and replaces Circular 29.