Credit promotion proves hard

Banks have scaled up their efforts to reschedule debts, lower interest rates for old loans and offered new loans at preferential rates, hoping to bolster credit demand.

Firms with bad debts but good production and business plans still have access to credit thanks to a dispatch from the State Bank (SBV) in mid-October that aimed to help firms recover and boost credit growth through the end of the year.

Deputy director of the Ho Chi Minh City branch of the central bank Nguyen Hoang Minh said that by the end of October the city’s banks had rescheduled loans valued at $5.8 billion for more than 340,000 customers and lowered interest rates to under 13 per cent per year on another $8.3 billion for 60,000 plus clients.

By the end of October, the city’s banks reported credit growth of around 5.2 per cent against early 2013.

“Credit improved and is on the rise, but for the banking sector to achieve its 12 per cent target for this year, growth will have to hit at least 1.5-2 per cent per month in the final months of the year, a very challenging task,” said Minh.

In the first nine months, state giant Vietcombank saw credit grow by only 4 per cent. Growth was under-par at other institutions including VietinBank, Eximbank, and DongA Bank while other small banks such as Southern Bank, Navibank, and PG Bank fell into negative growth.

At other banks with more positive credit figures such as Sacombank, HD Bank, and NamA Bank, surging credit reportedly came mostly from individual customers.

The SBV has proven not to strict in controlling credit growth to support banks credit targets. One example was the southern hub’s NamA Bank receiving the green light to grow credit from 9 to 30 per cent this year.

The bank hit this target by the end of September and has applied for permission to go even higher.

NamA Bank deputy general director Tran Ngoc Tam said that although the credit growth target of 30 per cent was surpassed by the end of September, the value was not so great, only in the tens of millions of dollars.

According to former SBV Governor Cao Sy Kiem, firms’ main concern at this time is not interest rates but low consumption. Therefore, there is a need for policies that stimulate demand. He noted that it would take time for the policies to generate effects.

“The banking sector’s credit expansion will reach 10 per cent this year if there are marked improvements in outstanding loans in the last quarter,” said Kiem, who added that the sector’s growth will improve next year as firms revive their operations on the back of more stable economic growth.