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SBV Governor touches on credit growth and interest rates

Released at: 15:37, 31/12/2014

SBV Governor touches on credit growth and interest rates

Credit growth in 2015 is to reach 13-15 per cent and the central bank hopes to cut interest rates.

by Yen Thanh

Governor of the State Bank of Vietnam (SBV) Nguyen Van Binh announced a credit growth target of 13-15 per cent in 2015 at a conference reviewing 2014 and also set missions for the finance sector.

Credit growth in the banking system was estimated at 13 per cent at the end of 2014, reaching the target. As at November 27 credit growth stood at 10.22 per cent, putting December's increase at nearly 2.8 per cent. Ms. Nguyen Thi Hong, SBV Deputy Governor, said that a rapid rise at the end of the year is quite common due to higher consumption for the holidays.

Agreeing, banking expert Mr. Can Van Luc was quoted by local media as saying that end-year credit growth is influenced by Vietnam's business culture, with enterprises wanting to close their accounting books at that time.

In 2015 the outlook for Vietnam's economy and the global economy will be brighter, and the credit package introduced in 2014 is likely to perform better than in 2015. The VND30 trillion ($1.43 billion) credit package and other State funds have been revised to be available for more borrowers.

However, in order to accomplish the credit growth target, banks must be prepared to overcome three barriers: demand in the economy, administrative procedures and procedures for bank loans, and bad debts. If bad debts are not settled then neither banks nor enterprises will be interested in credit, Mr. Luc suggested.

Governor Binh confirmed that the SBV will reduce interest rates if possible in 2015, but stability will be difficult. Because the economy is showing signs of recovery, the economic growth target for 2015 approved by the National Assembly of 6.2 per cent, (up from 6 per cent in 2014) will increase capital demand and put pressure on interest rates.

In 2015 inflation is estimated at 4 per cent. Deposit rates are to fall 0.5-1 per cent, therefore lending rates can be cut by 1-2 per cent, another banking expert Dr. Nguyen Tri Hieu was quoted as saying.

Mr. Luc said that interest rates must be adjusted based on 2015 inflation. With inflation forecast at 4.5-5 per cent, a ceiling on deposit interest rates of 5.5 per cent would be reasonable, and banks can further cut interest rates to support enterprises. Credit activities of banks bring net profit margins of only about 2.5 to 2.8 per cent, but they can reduce their administrative costs to lower interest rates and support enterprises.

  • TAGS
  • SBV
  • Nguyen Van Binh
  • National Assembly
  • credit growth

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