The State Bank of Vietnam has asked banks to classify their outstanding loans by June 1, a request insiders say will affect both the lenders and borrowers and increase concerns on nonperforming loans.

However, the new regulation, stated in the SBV’s Circular No.2, contradicts with another central bank’s policy -- the Directive No.780, said Cao Sy Kiem, member of the Monetary Policy Consultant Committee.

Specifically, under the Directive No.780, businesses were allowed to have their debts restructured with lowered lending interest rates and extended maturities starting July 2012, Kiem said.

“Hence, once the Circular No.2 takes effect, these restructured debts will be classified as bed debts, which will put negative impact on businesses,” he said.

Similarly, Nguyen Manh Tuyen, director of Hanoi-based Tan Phat Co, said the debts restructured under the Directive No.780 will become nonperforming loans as borrowers still fail to settle these liabilities.

“Businesses with bad debts are likely to go bankrupt as they will not be able to borrow new loans to maintain operation,” said a representative of May 10 Corporation.

Businesses will thus be driven to the bankruptcy, he said.

Banks affected, too

Le Hung Dung, chairman of Eximbank, said the regulation will also affect banks, as their profits will continue to fall down when restructuring debts.

“It’s necessary to increase credit transparency, but it is not advisable amid these hard times,” he said.

“Classifying debts will cause difficulties for the banking system, as well as the businesses, and some will even fail to survive from bankruptcy,” he pressed.

Sharing his concern, Kiem said the central bank should consider finding a balance solution in implementing the two policies.

“For instance, the implementation of the Circular No.2 should be delayed from June 1 in order to help businesses overcome the tough spot,” he said.

“When the current debts are classified, other policies aiming at easing businesses such as extending debts, cutting taxes may become meaningless,” he warned.