Banks debts affect people’s pockets

However, with the method, if the state budget does not have to spend money, people as a result will lose money.

“As I said before, if state’s money is not used to deal with bad debts, money elsewhere will be spent on this,” said Truong Dinh Tuyen, former Minister of Trade. 

Tuyen is also the head of the former Nguyen Tan Dung Prime Ministerial advisory team.

According to the expert, three groups are losing money because of bank debts.

First, depositors. They have to deposit their money at banks at low interest rates. The bank deposit interest rates are on slight decrease.

The latest bulletin released by the HCM City Securities JSC showed that Dong A Bank has eased the deposit interest rates by 0.2-0.5% for all deposit terms. 

Meanwhile, Sai Gon Commercial Joint Stock Bank has cut down the deposit interest rate by 0.1% for short-term (1-4 month term) deposits, and Techcombank has cut by 0.1-0.2% for 2-month, 18-month and 24-month term deposits.

Second, banks and credit institutions. The institutions have to cut their profits to reserve money for provisioning for bad debts, including debts they have sold to the Vietnam Asset Management Company (VAMC).

Third, borrowers, who are the most vulnerable. Since banks have to make provisions for bad debts, their capital mobilization cost becomes high. Therefore, they would impose higher interest rates on borrowers.

Local newspapers have quoted experts as reporting that the lending interest rate may increase in the time to come and that the State Bank will find it very difficult to curb the lending interest rates at last year’s rates.

Le Duc Thuy, former Governor of the State Bank, predicted that the lending interest rate in 2016 would be 1-2% higher than that in 2015.

“One must not say enterprises will still be able to expand their production and business normally like in 2015 or better than 2015 if the interest rate goes up,” Thuy said.

Once the bank loan interest rates go up, the production cost will increase accordingly. If so, there will be two choices for businesses – either to accept lower profit, or even loss, or raise the selling prices of their products and services.

If businesses choose the second way, it will be people who lose money.

“We have been persistent on the principle that we must not use any dong collected form taxpayers and must not borrow money to settle banks’ bad debts. However, if banks still have to keep bad credit, they will not be able to continue playing their role of capital mobilization,” Thuy commented.