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Banks ask for higher credit quota to prepare for peak lending season

Despite a credit slowdown in the first half of 2020, some private commercial banks have still asked the State Bank of Vietnam (SBV) for a credit growth expansion to prepare for a peak lending season expected at the end of the year.

According to the SBV’s policy, it assigns an annual credit growth quota for each bank depending on business performance and bad debt ratios to control lending of the entire banking system and ensure money supply and inflation control as targeted by the Government.

 

 

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The credit growth in the first half of this year is only half of the same period of last year. SBV’s statistics showed banks’ mobilised capital increased by 5.31 percent while loans grew only by 3.45 percent in the period.

However, banks said loans often increase sharply at the end of the year when capital demands of both firms and individuals surge significantly to prepare for the country’s holidays and festivals.

According to finance expert Huynh Trung Minh, it is feasible for the SBV to loosen the credit growth limits for banks, but banks must ensure to lend to only effective projects.

SBV has also recently expanded credit growth limits for some banks with healthy business performance to boost the country’s economic growth. Techcombank, VIB, VPBank, TPBank and Sacombank were approved to raise their credit growth limits to 19-23 percent.

Despite the expansion, a report of BIDV Securities Company (BSC) estimated the credit growth of the entire banking system this year would be only 9 percent, compared with the 13 percent rate in 2019.

Banks have been reducing the proportion of lending to individuals and small- and medium-sized enterprises (SMEs) while focusing on large-sized businesses with good resistance against the COVID-19 pandemic, BSC noted.

Sharing the same view, Vietcombank Securities Company (VCBS) also said the SBV had loosened credit growth limits for some banks, but the credit growth of the entire banking system would be less than 10 percent in 2020.

Analysts from Saigon Securities Incorporation (SSI) estimated an even lower rate. SSI’s recent report on the outlook for the banking industry in the second half of 2020, forecast credit growth in 2020 could be around 7.5-8.5 percent.

According to them, the credit demand may continue to weaken as the country still suffered impacts of the pandemic while banks, especially large-sized ones, may not lower their credit granting standards.

 

VNA

Bad debts tend to rise despite slow credit expansion

Bad debts tend to rise despite slow credit expansion

Non-performing loans are still increasing despite slow credit expansion as the COVID-19 pandemic stretches many businesses to their limits.  

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