VietNamNet Bridge – The banking system is plagued by low credit growth, huge liquidity but firms unable to borrow, and difficulty in selling mortgaged assets to liquidate bad loans, heard a meeting between National Assembly members representing HCM City and the central bank in the city on Monday.

Packages are manufactured at My Chau Printing and Packaging Co in HCM City. SMEs are unable to borrow although banks want to lend more, because of depreciation of their mortgaged assets.

Attendees said firms could be divided into three groups: competitive ones that all banks want to lend to; small- and medium-sized enterprises (SMEs) that are in debt but would recover; and the hopeless ones.

"The second group should be rescued and economy can fully recover after that," Tran Du Lich, deputy head of the lawmakers' delegation was quoted as saying by Tuoi Tre (Youth) newspaper.

But Phan Huy Khang, general director of Sacombank, said: "It is hard to define which companies are in the second group. We have to seriously consider many cases but dare not to lend because their assets are not enough to guarantee their loans and their project is unprofitable."

He said in the context that lending for aquaculture and cultivation in the Mekong Delta has fallen sharply due to high risks.

An Agribank executive, concurring with Khang, said many firms would perish without bank credit, but banks cannot provide money for all of them.

Besides, [the second] group cannot fulfill borrowing requirements, and lending to them would be very risky, he said.

Do Minh Toan, general director of ACB, said SMEs were unable to borrow despite the fact that banks would like to lend more to them because of depreciation of their mortgaged assets and lack of others.

Banks want to lend badly but they have tightened lending norms after many firms failed to manage their funds well and got into difficulties.

"We don't ask for a perfect score," Do Duy Hung, general director of Viet Capital, said.

"[Even] if enterprises can get 6-7 points, we are eager to lend and at the rate of 11 per cent. We will not have much profit but we would rather lend than sit on cash."

Selling assets mortgaged against bad loans is another challenge. Loan contracts stipulate that banks have the right to sell mortgaged assets, but in practice they can do nothing if customers fail to sign off at the time of sale.

"In many cases, principal and interest exceed the value of mortgaged assets, and banks have to go to court," one executive said.

"It takes a very long time, some cases go on for two or three years."

Borrowers use many other tricks to prolong the case.

The State Bank of Viet Nam's HCM City office said at the meeting that as of March end VND3.5 trillion (US$170 million) worth of bad loans had been recovered [or sold to the Viet Nam Asset Management Company].

The total bad loans in the city are worth VND46.4 trillion ($2.2 billion), or nearly 5 per cent of outstanding loans, and VND77 trillion worth of assets have been mortgaged against them.

Source: VNS