Banks prodded to lift credit

Scores of enterprises are in desperate need of capital, but are scared off by high interest rates

Vietnam Banking Association (VNBA) general secretary Duong Thu Huong said the 12.97 per cent credit growth during the first seven months of the year was not too low.

“In the remaining months of the year, the local banking system will fill the gap. The year’s credit growth target of 25 per cent is within reach,” said Huong.

From July, the State Bank started loosened its monetary policy through pumping money into the banking system. It pumped money through open market operations (OMO) with higher volumes in recent weeks.

Tran Du Lich, a member of the National Advisory Council for Monetary Policy, admitted that the credit growth pace in the first seven months of the year was slower than previous years.

“But, it had limited effects on the economy and local enterprises in particular as the inventory data of the economy is quite high,” said Lich.

The State Bank also injected around VND10 trillion ($526.3 million) in refinancing capital to Vietinbank to support its credit for exports since early July and another VND10 trillion ($526.3 million) to Agribank for the agricultural sector.

Do Minh Toan, deputy general director of Asia Commercial Bank (ACB), said local banks were trying to push up credit extension via lowering lending and mobilising rates.

By the end of last week, local lenders offered deposit rates from 10.5 to 11.2 per cent per year.

In ACB’s plan, it would extend around VND54 trillion ($2.76 billion) in credit to corporate borrowers, but in reality it is just VND42 trillion ($2.15 billion).

“The credit growth rate in coming months is expected to go higher than in previous months, the average deposit interest rate may fall under 10 per cent a year from 10.9 per cent which will not affect total deposits,” said Nguyen Van Giau, the State Bank’s governor.

The central bank planned to pump around VND30 trillion ($1.5 billion) into supporting agricultural sector credits by the end of this year through commercial banks. Agribank will also allocate around VND4 trillion ($210.5 million) from compulsory reserve cuts allowed by the central bank to support medium and long-term credits in the near future.

“Stimulating agricultural sector credit will not affect foreign currencies as the money will flow domestically with the expenditure plans of enterprises and farmers within Vietnam,” said Giau.