Bank NPL still manageable: Central Bank Governor
Bank NPL still manageable: Central Bank Governor
The financial position of commercial banks in Laos looks set to remain healthy despite facing difficulty in collecting debts from a number of construction firms.
“Non performing loans (NPL) in the Lao banking system have remained below the ceiling plan of 3 percent,” the central bank governor, Dr Somphao Phaysith told a National Assembly conference in Vientiane on Monday, easing worries among members of the public over the health of the Lao banking system.
Over the past several months, commercial banks in Laos have been struggling to collect debts from construction firms who borrowed money to invest in public infrastructure projects. Under a government policy, the private sector was allowed to invest in the state projects first and then the government repaid the companies later.
The government has been unable to achieve its revenue collection target, forcing it to suspend debt repayments to construction firms.
Details on the amount of loans, which ba nks in Laos provided to construction firms, were not immediately available to the media. However, international financial institutions reported that lending in Laos rapidly increased by over 30 percent in the last few years and a large amount of the credit was released to the construction sector.
The international financial institutions have urged the central bank to curb its lending to maintain macro economic stability while the lending should not focus on public infrastructure, with its returns and benefits coming over the long term.
Rather, the focus of lending should be on the construction of factories, which can produce goods for domestic consumption and export bringing returns and benefits more quickly.
According to a latest report from the central bank, there was a 12.45 percent increase in credit in March this year compared to September 2013. The government still promotes lending as part of efforts to boost economic growth.
A number of construction firm owners have expressed concerns over the survival of their businesses, afraid the commercial banks would seize their property, which they used to guarantee the bank loans so the banks could maintain their financial position.
About 95 percent of the money, which banks use for lending to businesses, is from individuals, and businesses organisations who deposit money as saving. The commercial banks have to return the money to society if it demands.
Dr Somphao said as part of efforts to help the embattled construction firms, the bank had relaxed credit regulation, adding that the banks would not force the construction firms to sell their assets in order to pay back the loans and interest to the banks.
The banks will also not down grade the credit of construction companies which failed to pay debts on time or impose penalty on the debtors.
vientiane times
