The State Bank of Vietnam’s statistics showed credit in the first half of the year grew 9.35% while the full-year target for credit growth is 14%. The remaining room for credit growth is equivalent to some VND450 trillion, and expected to be prioritized for the business and manufacturing sectors.

Banks have used almost up their credit growth quotas by lending heavily to property projects, the central bank said at a conference on a review of the banking sector’s first-half performance.

As the property sector has taken a hit from credit tightening, it has had problems with cash flow, thus affecting lender banks and eventually causing a credit crunch, the central bank governor, Nguyen Thi Hong, said.

Dr. Dinh The Hien, an economist, said loans given to property companies during the first eight months of the year were much larger than those to other sectors.

Bank loans account for 70% of a real estate project’s value.

According to VNDIRECT Securities Joint Stock Company’s experts, there are two reasons for property companies to access bank loans at the moment.

First, the ratios of short-term capital used to make medium and long-term loans at commercial banks will fall by three percentage points to 34% as from October 1. Thus, they will have to prevent outstanding real estate loans from surging as property loans usually come with medium and long terms.

Second, lending to the real estate sector is far risker than other sectors, so the central bank will allocate extra credit growth quotas to banks with a low proportion of real estate loans or no real estate loans at all.

Source: Saigon Times