Banks look to increase credit

09:44 | 28/11/2013 Economy

(VEN) - Many experts remain concerned about the slow growth of credit so far this year. However, State Bank Governor Nguyen Van Binh said it was possible to reach the credit growth target.

Can credit grow by 12 percent?

The State Bank of Vietnam said that credit grew by 6.8 percent in the first ten months of this year or by 7.89 percent including the balance of outstanding credit, which was set aside as risk prevention funds and trading by debt trading companies. To reach the credit growth target, credit disbursement must increase by a minimum 1.5 percent per month from now until the end of the year, compared with 0.79 percent per month in the first ten months of the year.

Despite that, Nguyen Van Binh said that it was possible to reach the growth target of 11-12 percent this year given that credit increased by almost three percent in the first ten months of 2012 but soared by 8.9 percent by the end of the year. “Moreover, based on the credit growth plans of credit institutions for the remaining two months, we believe that we can achieve the credit growth at 11-12 percent this year,” said Nguyen Van Binh.

Many experts were worried that the rapid growth in credit in the last two months of the year would cause high inflation. Nguyen Van Binh said that the State Bank would not let this happen as it has closely controlled money flows and has reserved sufficient capital for credit growth in the last months of the year. 

Changes in the banking market

The State Bank has asked credit institutions to take comprehensive and tough measures to resolve difficulties for customers and make it more able for businesses to obtain their loans. The State Bank has also allowed credit institutions to extend debts, restructure loans and exempt or lower loan interest rates to help both banks and businesses reduce their burdens.

Loan interest rates have reduced sharply and have been kept stable at 9-11.5 percent per year for a long time providing favorable conditions for producers and traders to increase their access to bank capital. “However, due to the economic standstill, businesses are facing difficulties, including high inventories and slow sales, which led to low ability to repay debts and obtain new loans,” said DongA Bank Advisor Cao Si Kiem.

Many experts said that the interest rate was no longer a barrier between banks and businesses. Major hindrances lie in the low financial capacity of businesses, the shrinking market and low purchasing power, meaning that businesses did not meet loan requirements. As for financially strong businesses, they do not need to obtain a bank loan since sales have not increased and inventories have remained high.


Many banks have offered preferential loans via promotion programs. Several banks have even reduced the gap between the interest rates on deposits and loans (reaching only less than three percent) to attract borrowers. Despite the efforts, banks have not been able to make up for risk prevention funds and or pay interest. For this reason, many banks said that they were unlikely to reach the credit growth target and that credit would likely to grow by less than 10 percent by the end of the year as a result of the falling demand.

The State Bank’s Money Policy Department Director Nguyen Thi Hong said that the State Bank would closely monitor credit institutions, while looking to change the 2013 credit growth targets of credit institutions which can increase their credit. It would also ask higher authorities to allow credit institutions to increase their credit for oil and gas import businesses and major projects to contribute to credit growth across the banking system. However, to make this happen, close coordination between related ministries and branches is needed to accelerate the pace of resolving bad debts and stimulate credit flows.