Banks to be allocated credit growth quotas

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Commercial banks and other credit institutions will be allocated growth rates based on their health and their performance last year.

Institutions will be classified into four groups, with well-performing lenders classed in the A group and weaker lenders in the D group.

The State Bank has asked institutions to set their own quarterly targets while the overall amount they can lend will be designated by the State Bank.

State Bank Governor Nguyen Van Binh said the central bank will continue to limit credit growth in the banking system but will relax the cap from 15 to 17 per cent to help curb inflation while ensuring total money supply increases under 16 percent for the year.

Ocean Bank deputy director Nguyen Thi Mai Huong agreed with the decision on credit growth rates allocation. Ocean Bank is planning to set its credit growth at 15 per cent for 2012, said Huong, adding that the bank expects to be classified at bottom of group A or the top of group B.

Eximbank general director Truong Van Phuoc said that one of the criteria for the central bank's classification should be the capital adequacy ratio, which measures a bank's capital in relation to its risk.

Meanwhile, industry insiders said the criteria should also include banks' bad debts, return on assets and return on equity and that banks with a majority of loans for exports, production, agriculture and rural development should be given priority for credit growth allocation.

Most banks have not yet released their 2011 financial statements.

SBV Governor Binh said credit growth in the domestic banking system was held at 13 per cent, the lowest level in recent years. compared to average figures of 29.5 per cent and 33 per cent respectively during the 2000-11 and 2006-11.

Although credit grew overall at under 13 per cent last year, credit for the production sector rose by over 15 per cent with priority given to agriculture with an increase of 25 per cent and exports, at 58 per cent.

Credit declined in the non-production sector, most significantly in the real estate and securities sectors, Binh added.