The State Bank of Vietnam (SBV) has instructed credit institutions and branches of foreign banks to report their lending to foreign direct investment (FDI) businesses before March 16.

Under Document No1355/NHNN-CSTT, the central bank also asked credit institutions to provide an assessment of their lending and debt collection to/from FDI businesses and to identify difficulties in the process of granting credit and collecting debts from FDI businesses.

In addition, credit institutions were asked to propose and recommend improvements to the legal framework on borrowing by FDI enterprises, strengthening co-operation between ministries, sectors, and localities.

The central bank said the move was part of a Government project to improve the effectiveness of managing FDI capital flows.

Recently, concerns about lending to FDI businesses intensified with the news that many FDI real estate projects were using loans provided by Vietnamese banks.

Though there have been no official reports on lending by domestic banks to FDI firms to date, former deputy director of the State Committee for Co-operation and Investment Nguyen Mai told Dau Tu (Investment) newspaper that there was no concern about the issue because there was only a limited number of FDI firms taking out credit from domestic banks.

To date, the Ministry of Planning and Investment (MPI) had scrutinised 30 reports from cities and provinces, exclusive of leading FDI destinations with large real estate projects such as HCM City , Hanoi , Binh Duong and Da Nang , Mai said. Most of the reports showed that only a small number of FDI firms received funding from domestic banks as most borrowed from foreign bank branches in Vietnam .

Under current regulations, Mai said that FDI firms could borrow from domestic banks but the SBV should instruct domestic commercial banks to restrict their lending because the nation's capital was limited and Vietnamese production firms were facing capital shortages for investment.

Echoing Mai, former director of the MPI's Foreign Investment Agency Phan Huu Thang said that though the country could not ban FDI firms from borrowing from domestic banks, it should regulate the proportion of loans that FDI firms could borrow domestically.

Domestic loans should only be given to FDI projects that needed counterpart capital from Vietnam or those that Vietnamese firms could not do, Thang said.-VNA