Letting credit take root

August 28, 2012 | 16:00
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Banks are mulling tapping agriculture and rural areas’ potential to bolster credit growth.

The State Bank envisages making public a new regulation covering credit organisation network expansion next month. Accordingly, local banks are encouraged to spread their arms to rural and remote areas.

Around 60 per cent of banks, bank branches and transaction offices are concentrating in Hanoi and Ho Chi Minh City, meanwhile banking system remains thin in rural and remote areas, according to State Bank governor Nguyen Van Binh.

Hence, in the banking system’s restructuring plan the State Bank urged banks in big cities and urban centres to boost scope and slacken density, in the meantime look further afield into rural areas.

“In early September 2012, the State Bank will wrap up discussions, submit documents to management authorities and enact a new regulation on credit network expansion and development gearing towards expanding the network in rural areas,” said Binh.

Senior economist Bui Kien Thanh assumed in the past joint stock banks in rural areas were effectively running with practical support for the development of rural businesses, co-operatives and farmer households.
However, these banks later asked for status conversion to turn themselves into urban banking entities, causing a chaos in the banking system. Hence, stimulating banks to expand scope in rural areas is crucial.

Lending to the agricultural sector is regarded as a remedy to help banks boost credit growth which until this time just expands 1.6 per cent.

OceanBank deputy director Nguyen Van Hoan said the bank credit growing 18 per cent in the year ending July partly came from its efforts to ramp up agriculture and rural sector credit programmes.

Like OceanBank, from early year banks raced to roll out concessionary credit packages earmarked to rural and agriculture sectors such as Lien Viet Post Bank, Agribank and Vietcombank.

Lien Viet Post Bank’s deputy chairman Nguyen Duc Huong underscored that lending agriculture and rural areas was one of the bank’s top priority fields.

Early last week the State Bank enacted documents demanding state banks to increase lending to agriculture and rural areas. Accordingly, lending rate to this sector must not surpass 11 per cent per year.

In the meantime, these banks were told to scale down old loan interest rate and expand debt maturity to a maximum 12 months for borrowers temporarily incurring default.

In fact, the agriculture sector has 70 per cent of Vietnamese population but only accounts for over 20 per cent of total outstanding loan balances. Hence, banks could reap upbeat profit figures if they were capable of launching suitable products to different areas and regions.  

By Thuy Lien


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