The State Bank of Vietnam (SBV) has suspended the implementation of some clauses in Circular No.39 dated December 30, 2016, to make it easier for borrowers to get bank loans.

Circular No. 39, that regulates the lending activities of credit institutions and branches of foreign banks, was revised by Circular No. 06 issued in June 28, 2023, with additional clauses designed to shield banks from risky loans.

SBV later found that those "some clauses", which bar banks from making loans under certain conditions, were not a wise choice amid the economic downturn: they would create a barrier for ailing companies to get bank money for recovery.

"SVB, therefore, has repealed three clauses of Article 8 to support economic growth," said an SVB representative.

Under the three clauses of Article 8 of Circular No. 39, banks are not allowed to make loans to borrowers who would use the loans to make capital contributions to LLDs, Partnerships, or unlisted JSC, or to leverage themselves.

Lê Hoàng Châu, chairman of the Real Estate Association of HCM City, said he was truly grateful to Prime Minister Phạm Minh Chính, who had pushed hard for the abolishment of the three clauses in Circular No.39.

The repeal of the clauses, he said, would significantly improve access to bank credits for the business community and individual borrowers.

Ngô Đức Sơn, director-general of DRH Holdings, said SBV's move was good news for real estate companies in dire need of capital as it removed the barrier for them to obtain bank loans.

He believed that what the government had pulled off would soon bring the real estate market back on track.

Economic expert Đinh Trọng Thịnh said SBV's move on Circular No. 39 would give banks more elbow room in lending. However, more room for loans does not necessarily mean a lower bar for borrowers.

He said banks should remain cautious when weighing the risks and returns associated with their loans to ensure a safe capital structure.

"Banks would be unable to recover their loans if they make loans to a company using the loans to make a five-year capital contribution to a project that only begins construction 10 years later," Thịnh said.

He said the suspension of the three clauses was a testament to SVB's efforts in ensuring not a single voice goes unheard. — VNS