BANKING SECTOR OVERVIEW: 1st quarter of year 2021
“Many people talk the talk but few walk the walk”
There are many people and companies complaining about how hard and long-process it is to take the GoM’s 10 trillion comprehensive plan’s 3 percent loans. Many even say they can not access these targeted loans. However, we need some clear and fundamental understanding of certain things in life.
There is an old saying that “Many people talk the talk, but few walk the walk” meaning people just talk instead of acting on the “talk”. During this hard time of the pandemic, the only place acting on the “talk” is a bank. The reason for this proposition is that banks are the only ones who are in the position of implementing the above targeted loan instruments (SME 3 percent loans, repo financing loans etc).
From the beginning of this year, the final decisions and clear guidelines of the GoM 10 trillion comprehensive plan’s loan instruments have taken some time to be delivered to banks. Just after some time banks started the targeted loan instruments, the next lockdown took place. Currently, over 1 trillion MNT loans were issued in the framework of the GoM 10 trillion comprehensive plan.
On the other hand, it does not mean that every single person or company is supposed to access these targeted loans. In the cases of unfiltered loan issuances, banks have a risk of facing the bad loans. In this situation, there is no guarantee that the bad loans will be repaid by the Loan guarantee fund. Therefore, banks’ interests and efforts would go to the risk assessments where they select the people and companies whose credit histories are trustworthy, current business conditions are proven to be good and at least borrowers’ collateral should be valuable in terms of non-repayments later on.
Last but not least, this GoM 10 trillion comprehensive plan does not support nor enhance the banks’ financial strengths. Instead, banks are playing important roles in social responsibility and economic redevelopment efforts through public-private partnerships.
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