Stopping foreign currency loans needs to harmonise exchange rate

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From October 1, businesses cannot borrow foreign currency loans. Photo: ThuyLinh

According to Circular No. 42/2018/TT-NHNN amending and supplementing some articles of Circular No. 24/2015/TT-NHNN stipulating foreign currency loans granted to residents by credit institutions and branches of foreign banks from October 1, 2019 commercial banks will stop foreign currency loans.

Earlier, under this circular, short-term loans used as outward remittance for imported goods or services for business and productions for the domestic demand stopped since April 1.

According to the SBV, this regulation to realised the roadmap of controlling foreign currency loans towards narrowing capital need and transforming from capital mobilisation relation into foreign currency trading relation.

At the press conference announcing performance results of SBV in the third quarter of 2019 on October, 1, Deputy Governor of the SBV Dao Minh Tu said the stopping of foreign currency loans is to implement the policy on combating dollarisation in the economy, which has been set out five to seven years ago.

“We should have done it earlier because this activity has been done according to the roadmap. But the loan stopping has been suspended to create conditions for businesses, especially those with specific loans,” Tu said.

Therefore, to the present time, the SBV's leader said with the stable economy, stable exchange rate, high foreign currency reserves it is possible to balance the foreign currency status in the long time, so the stopping of foreign currency loan is reasonable. Moreover, due to the roadmap and gradual implementation, businesses have taken the initiative and have not been shocked.

To support businesses when foreign currency loans are no longer, Tu said commercial banks are providing more support. In particular, the transformation to foreign currency trading relation and stable exchange rate also facilitates import-export businesses.

"When stopping foreign currency loans, the most important thing is balancing and harmonising foreign currency status for businesses to be willing to buy and sell foreign currencies," Tu said.

Currently on the market, many banks said they are ready for businesses to convert loans into VND and then buy foreign currencies at the exchange rate at the time of VND loans to get foreign currencies to pay for imported goods. In addition, banks also offer many financial solutions to support import and export enterprises such as deferred payment letter of credit (L / C) or proposing solutions to help businesses have effective financial management.

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On the side of enterprises, though they have to transform into VND loans with interest rates up to 9-11 percent per year, instead of foreign currency loans with interest rates at 4-5 percent per year as before, they will not worry about risk of exchange rate fluctuations, especially amid trade tensions between many countries around the world.