Small banks hit by lending directive

March 16, 2011 | 17:52

(0) user say

Banks are urged to slash lending to non-production areas to help the government curb inflation.

OCB bank general director Trinh Van Tuan said the banking authorities’ recent decision to retain outstanding loans’ growth of less than 20 per cent in 2011 and restrict lending to non-production areas presented big challenges to small banks.

For many small- and medium-sized banks, non-production sector lending represents up to 80-90 per cent of their income sources.

OCB had gradually restructured its lending to bring down the rate to less than 22 per cent before June, 2011 from the current 30 per cent, Tuan said.

He said the OCB would pause lending to property and securities sectors and consider restricting consumer loans provisions.

DongA Bank is in a similar position. According to the bank’s general director Tran Phuong Binh, DongA Bank had restructured its credit activities and highlighted lending production and trading areas.

The bank stopped lending securities business and its current rate of outstanding loans to non-production areas at around 22 per cent, Tuan said.

TrustBank chairman Hoang Van Toan said local banks, particularly small ones, would find it arduous to reduce the rate of outstanding loans to non-production areas to 22 per cent by late June, 2011 as were required by banking authorities since currently such rate stays high at small banks.

According to State Bank governor Nguyen Van Giau, banks with lending rates to non-production sector of above 26 per cent must cut the rate to around 22 per cent by June 30, 2011 and the banking sector must reduce the rate to as low as 16 per cent by the year’s end.

By Thuy Vinh

vir.com.vn

What the stars mean:

★ Poor ★ ★ Promising ★★★ Good ★★★★ Very good ★★★★★ Exceptional