Credit growth ceiling increase raises concerns
Credit growth ceiling increase raises concerns
Experts are concerned the State Bank of Viet Nam's recent decision to raise credit growth ceiling for many lenders could raise serious risks in the coming years.
SBV raised the credit growth ceiling for 18 lenders this week to boost economic growth. The ceiling was raised to more than 30 per cent for some lenders.
The central bank's decision has been supported by the lenders – whose profit mainly comes from lending activities – as they have already used the lending quota allowed earlier this year.
According to Dau tu chung khoan (Securities Investment) newspaper, experts said an increase in credit growth ceiling was necessary as the economy had become stable and was growing. However, a hike of more than 30 per cent could cause serious consequences such as high inflation, as it happened in 2009.
The leader of a bank, who declined to be named, told the newspaper that the lending of banks currently was not as easy as in previous years. Roughly 70 per cent of firms had failed to meet the banks' lending requirements so that the lenders must boost retail lending, especially consumer lending, he said.
However, Director of the Business Development Institute Le Xuan Nghia said lenders should not entertain any illusions about boosting consumer lending.
Nghia said only countries with a high per capita income of at least US$6,000 such as China could think about boosting consumer lending, as high incomes could help the domestic market become strong to ensure the nation gained an annual economic growth of more than 6 per cent. The nation could not boost consumer lending unless it also had exports as its main market, Nghia said.
Viet Nam's per capita income was just a little more than $1,000, while the domestic market's capacity was insignificant, Nghia said. Consumer loans, in fact, can flow into real estate and securities speculation.
The risks can not occur right at the end of this year, but in the next few years, as in 2009 when the country applied a loose currency policy with high credit growth. After that, the banking industry had to deal with a high bad debt ratio of roughly 17 per cent in 2012.
Statistics from the central bank said after the handling of VND311 trillion ($14.33 billion) of non-performing loans (NPLs), there remained VND214.9 trillion ($9.9 billion) NPLs at the end of last year or 4.83 per cent of the banks' total outstanding loans.
Experts said while the handling of NPLs was slow and new NPLs were continuously rising, banks should not boost lending in any way to meet the allocated credit growth quota to avoid a sharp rise in NPLs as it happened earlier.
Banking expert Nguyen Tri Hieu said the central bank's adjustment of the credit growth ceiling for some banks to more than 30 per cent was an overheated growth and, in theory, could raise the chances of the same risks as the credit growth in Viet Nam did in 2009.
However, Hieu said, this credit ceiling adjustment was better controlled than earlier, and so the risks would be reduced.
To avoid any risks, Hieu said commercial banks should improve their risk management system, while the central bank should closely supervise lending to be able to prevent and warn commercial banks about bad debts.
