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Banking & Finance

Credit growth at 9.09%

Released at: 06:49, 12/09/2016

Credit growth at 9.09%

Photo: Duc Anh

SBV report notes healthy growth while flagging problems with bad debt settlement.

by Duy Anh

Credit growth as at August-end stood at 9.09 per cent against the end of 2015 but bad debt settlement remained problematic, according to the latest report from the State Bank of Vietnam (SBV).

The credit structure continued to be in transition, with more focus on business and production activities while credit in real estate and other risky sectors was under control.

Lending to agriculture and rural development in the first eight months (excluding lending from the Vietnam Bank for Social Policies and the Vietnam Development Bank) stood at approximately VND900 trillion ($40.36 billion), up 6.64 per cent since the end of 2015 and accounting for 18 per cent of total outstanding loans.

Since the end of April, State-owned commercial banks and joint stock commercial banks have cut 0.5 per cent from their interest rates on short-term lending and adjusted rates on mid- and long-term lending to a maximum of 10 per cent per year for manufacturing customers. The current interest rate is 6 to 9 per cent per annum on short-term lending and 9 to 11 per cent on mid- and long-term lending.

The central bank’s calculations to the end of June put bad debts at 2.58 per cent, down slightly from 2.78 per cent in May.

The SBV also revealed that bad debt settlement by the Vietnam Asset Management Company (VAMC) and financial institutions in recent times has faced a host of difficulties due to policies on collateral remaining inadequate and not creating the conditions for bad debts to be fully settled.

2016 may be the first year credit growth has increased significantly and has been spread equally over the months rather than fluctuated. The SBV has continued to regulate monetary policy, setting a full-year credit growth target of 18 to 20 per cent in early August.

On August 11, SBV Deputy Governor Nguyen Thi Hong told a press conference in Hanoi that the money supply target for the year remains at 16 to 18 per cent. Her statement dampened recent expectations that the central bank may loosen monetary policy to give a boost to the economy in the context of lower-than-expected GDP growth in the first half.

Ms. Hong also said that capital for economic growth could come from various sources such as the State budget and FDI and the government would utilize these sources to reach this year’s GDP growth target of 6.7 per cent.

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