The Governor of the State Bank of Vietnam, Nguyen Van Giau, says that a rollover is a process whereby a business takes out a subsidised loan from a bank to pay back high interest loans it borrowed earlier from that bank or other banks.

However, experts warn that a rollover can also be seen in the non-banking sector, meaning that businesses use their subsidised loans to re-invest in other depressed and risky sectors such as securities and property.

According to commercial banks, their total outstanding balance from the subsidies programme has reached more than VND152,000 billion. Experts recently pointed out several signs of a rollover among businesses, saying that the outstanding balance has increased slightly compared to the total amount of VND620,000 billion expected to be disbursed by the commercial banks to support businesses.

However, leaders of the country’s two leading financial monitoring agencies are inconsistent in whether or not allowing businesses to roll over bank loans.

In recent interviews with the media, Mr Giau from the central bank confirmed that his bank has not discovered any rollover yet and that it will strictly deal with any businesses if they are found to be misusing subsidised loans.

Meanwhile, Le Duc Thuy, president of the National Finance Monitoring Committee, also reported that his committee has not yet found any rollover, but he would support any businesses if reported.

Banks themselves are reluctant to talk about the rollover because this practice is not only banned for subsidised loans but is also sometimes applied to normal loans. When asked about this, representatives of many commercial banks acknowledged that there had been a secret rollover happening in many different ways.

If the problem is not promptly solved, it will have far-reaching consequences, according to experts.

First of all, several ineligible businesses voluntarily set aside part of their subsidy for lenders to entice them to take out loans. Expert fear that this “tempting tip” will give fresh impetus to lenders and that their lending terms will slacken off soon. 

Second, if the rollover is not accepted and re-investments are not strictly monitored, it will be difficult for banks to control the use of their loans. If the new loans are used to invest in securities and property, they will help to warm up the securities and property markets, but cause far-reaching consequences in the long run. Once more capital is pumped into these sectors, it will stimulate market speculations and drive up credit growth and inflation.

In addition, this trend goes contrary to the Government’s policy of restructuring investment flows, according to which priority is given to boosting production and less capital will be pumped into the frozen property market.

The Government’s subsidy programme will be way off course if the use of bank loans is not strictly monitored, warn experts.