For­eign banks al­lowed to set for­eign cur­rency loan in­ter­est rate

The Myanmar Times - - Business - HTIN LYNN AUNG htin­lyn­[email protected]­

THE Cen­tral Bank of Myan­mar (CBM) said for­eign banks are free to set their own in­ter­est rate as long as those loans are in for­eign cur­ren­cies.

For­eign banks with branches in the coun­try are now al­lowed to do whole­sale bank­ing ser­vices and other fi­nan­cial ser­vices, ac­cord­ing to the lat­est Di­rec­tive is­sued by the CBM last month.

CBM has al­lowed for­eign bank branches to pro­vide loans and other bank­ing ser­vices for com­pa­nies and or­gan­i­sa­tions but there are still re­stric­tions on ac­cep­tance of im­mov­able prop­er­ties such as land and build­ing as col­lat­eral and ac­cep­tance of fixed de­posit sav­ing and pay­ing in­ter­est in kyat.

In ad­di­tion to the ap­proval, CBM also an­nounced that it will al­low for­eign bank branches to ex­pand in 2019.

“Lo­cal banks have been al­lowed to do so for 25 years. They still have cap­i­tal re­quire­ment. We can’t close lo­cal banks - even they have yet to de­velop. The main thing is that we need to pri­ori­tise the growth of the econ­omy for the en­tire coun­try,” CBM’s deputy gover­nor U Soe Thein said.

Deputy gover­nor U Bo Bo Nge stressed that CBM would want for­eign banks to sup­port the coun­try’s fi­nan­cial in­dus­try and eco­nomic de­vel­op­ment.

For­eign banks can now lend in both for­eign cur­rency and Ky­ats and they have re­ceived per­mis­sion to pro­vide ev­ery trade-re­lated bank­ing ser­vices.

“The in­ter­est rate for for­eign cur­rency loan is not stated, but it will be ac­cord­ing to the mar­ket price. How­ever, for the Ky­ats loan, the in­ter­est rate must not be over 13pc,” said U Soe Thein.

This will spell pos­i­tive changes for Myan­mar, which is in need of cap­i­tal in­vest­ments to de­velop its in­fra­struc­ture and econ­omy.

“The Ky­ats loans must be ac­cord­ing to the lo­cal rules. As for­eign banks can get back the Ky­ats only from the lo­cal banks, there might be no big dif­fer­ence in in­ter­est rate for Ky­ats,” U Soe Thein said.

“The key is­sue is that for­eign banks need to give out loans with for­eign cur­rency and if they are of­fered ac­cord­ing to the in­ter­na­tional mar­ket rate, many lo­cal busi­nesses can se­cure loans. Al­though the CBM has per­mit­ted, it is un­cer­tain if they will give out for­eign cur­rency loans or not and so, we need to ob­serve,” said CB Bank’s se­nior con­sul­tant U Pe Myint com­mented. He said lo­cal banks need not to be wor­ried about the com­pe­ti­tion as re­tail bank­ing has not been lib­er­alised.

The lo­cal bank­ing com­mu­nity said it would take some time for busi­nesses in the coun­try to fa­mil­iarise with loan ap­pli­ca­tions.

U Ge­orge Soe Win, pri­vate ad­vi­sor on bank­ing and in­vest­ment is­sues, said for­eign banks would need six months to get ready the loan ser­vices while lo­cal busi­nesses would need to pre­pare the doc­u­ments for ap­pli­ca­tions. It will also take longer time to se­cure a large loan.

He spec­u­lated that the likely out­come is that more short-term fi­nan­cial as­sis­tance will mean more ac­cess for trade fi­nanc­ing. How­ever, there are many steps lo­cal in­dus­tries need to work out for the loan sec­tor.

“The in­ven­to­ries de­manded by the for­eign banks are not like lo­cal CPAs. They must be In­ter­na­tional Fi­nan­cial Re­port­ing Stan­dards IFRS. Then, they mon­i­tor the in­come tax amount,” U Ge­orge Soe Win.

At the same time, it will not be easy for lo­cal busi­nesses to ap­ply for loans due to the preva­lent busi­ness prac­tice.

“I wel­come the ap­proval of the Cen­tral Bank. How­ever, we don’t have credit bu­reau, le­gal in­fra­struc­ture or tech­no­log­i­cal in­fra­struc­ture so far. If a loan is ap­plied, for­eign banks will ask col­lat­eral, tax-pay­ing record and loan facts. Most busi­nesses in Myan­mar are weak in it and I think busi­nesses will get ben­e­fits only af­ter tak­ing some times to pre­pare for it,” U Ngwe Tun, owner of Ge­nius Cof­fee told The Myan­mar Times.

In get­ting loans with Let­ter of Credit (L/C) in the com­mer­cial bank­ing ser­vices of the for­eign banks, it will take more time than lo­cal ones, busi­nesses said. This pre­sented an ad­van­tage for do­mes­tic banks.

‘I wel­come the ap­proval of the Cen­tral Bank. How­ever, we don’t have credit bu­reau, le­gal in­fra­struc­ture or tech­no­log­i­cal in­fra­struc­ture so far.’

U Ngwe Tun Ge­nius Cof­fee

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