HA NOI — The State Bank of Viet Nam has increased this year's
credit-growth targets for a number of commercial banks, hoping to spur
lending to struggling enterprises dealing with high inventories and
sluggish markets.
The adjustment followed State Bank Governor Nguyen Van Binh's
announcement on Thursday that credit institutions would be urged to help
boost the nation's economic growth in the second half of the year.
Of the nation's 62 credit institutions, 23 wanted to increase their
credit growth quotas. The State Bank has agreed to increase the quotas
for 10 banks with lending totals in the first half of the year outpacing
quotas.
Earlier this year, the State Bank divided banks into four groups
depending upon their performance in the prior year. Banks were allocated
credit growth quotas according to their group designations. Group 1
(healthy banks) were given a target of 17 per cent, while Group 2
(average banks) received a target of 15 per cent, Group 3 (below-average
banks) a target of 8 per cent. Group 4 (weak banks) were not allocated a
credit growth quota.
Average credit growth higher than 15-per-cent was deemed inflationary.
In the first half of this year, however, credit in the commercial
banking sector grew by an average of just 1.51 per cent over the
previous year, with 69 credit institutions seeing credit decline while
57 others saw growth.
To ease enterprises' access to credit, interest rates have also been
lowered. The proportion of outstanding loans in Vietnamese dong with
interest rates in excess of 15 per cent per year has fallen to about 29
per cent of total lending, a decrease of 60 per cent since the State
Bank asked commercial banks a few weeks ago to refinance outstanding
loans at rates below 15 per cent.
The lower interest rate of 15 per cent was aimed at getting banks to
share difficulties with enterprises, reducing their profit margins to
ensure economic stability. A number of enterprises have remained
reluctant, however, to take out additional loans.
"Low interest rates are no longer a vital factor in attracting
enterprises," Eximbank general director Truong Van Phuoc told the
newspaper Nguoi Lao Dong (The Labourer) yesterday. "Low purchasing power
has made them cautious."
According to an Eximbank analysis, Phuoc said, interest costs currently accounted for 24 per cent of business expenditures.
The sharp decrease in lending rates has not spurred businesses to
increase borrowing because purchasing power in the market remained
depressed, economists agreed. As of the end of July, outstanding loans
at commercial banks had risen only 0.57 per cent over the end of last
year despite lending interest rates falling from an average of 17-18 per
cent to 10-15 per cent.
Many economists have called for new policies to stimulate consumer
demand, criticising policymakers for focusing too much on fighting
inflation, leading to rapid increase in unsold inventories and an
economic slowdown.
With deposit interest rates now average 9 per cent per year and
lending rates held below 15 per cent, some have argued that banks have
favourable conditions to reduce lendings rates further, to 11-12 per
cent.
However, financial specialist Nguyen Dac Hung noted that banks have
to allocate 3 per cent of profits for compulsory reserves and maintain a
10-per-cent payment reserve, as well as cover operating costs.
Rising bad debts have also cut into bank profit margins. Some experts
have suggested the Government allow commercial banks to write off bad
debts against capital reserves. — VNS
