Banks urged to loosen credit growth limits
Banks urged to loosen credit growth limits
Many commercial banks ran out of credit room at the end of the first half of the year in light of the dire need of capital to develop enterprises’ trade and production activities during the post-pandemic period.
Businesses are in dire need of capital to develop their trade and production activities |
Fast credit growth
According to the State Bank of Vietnam (SBV), credit had expanded by 8.2 percent by June 18 and many commercial banks had reported using up their full-year credit room at the end of the first half of the year.
Ly Kim Chi, chair of the Food and Foodstuff Association of Ho Chi Minh City, said businesses are in dire need of capital and they do not dare to receive more orders for fear they will not have enough capital to reserve raw materials.
Nguyen Phuoc Hung, deputy chair of the Ho Chi Minh City Union of Business Associations (HUBA), said Vietnam’s economy is recovering and businesses are in dire need of capital to revive broken supply chains, recruit new workers and renovate machinery and equipment.
Many commercial banks have asked the SBV for credit room expansion. Nguyen The Minh, head of the Individual Customer Analysis Division at the Yuanta Vietnam Securities Company, said that without capital injection, businesses may not be able to recover, putting pressure on bad debts. He added that banks with good asset quality and financial capacity should be given priority to allocate greater credit room.
Additional room to be approved
SBV Deputy Governor Dao Minh Tu said the 14 percent credit growth target for 2022 may be adjusted depending on the actual needs of the economy. The most important thing is to control inflation and ensure macroeconomic stability, he added.
According to financial experts, room expansions are expected to occur at the end of the third quarter of 2022 and credit growth quotas will depend on the financial health of each institution. The current credit room shortage offers opportunities for banks to improve credit quality, directing credit to production and priority sectors and tightening control on credit for high-risk areas.
These experts argue that instead of controlling credit growth ceilings, the SBV should control credit through Basel II’s capital safety and risk management standards in conjunction with periodic checks.
SBV Governor Nguyen Thi Hong said that as total outstanding loan balance increased strongly in the first five months of 2022, the SBV will have to carefully review credit activities, as well as the financial health and compliance with capital adequacy ratio (CAR). Therefore, raising this year’s credit growth limits for banks will depend on their credit quality and CAR, Hong said.
| Nguyen Quoc Hung, secretary-general of the Vietnam Banks Association, said the SBV needs to control credit growth at a reasonable rate in order to curb inflation and maintain macroeconomic stability. |
