Banks with the problem of promoting credit growth

Banks still expect positive credit targets for the whole year. Photo: ST

Credit demand is weak due to declining business "health"

According to the State Bank (SBV), in the first 6 months of 2024, many banks were falling into negative credit growth. For example, ABBank had negative credit growth of more than 10%, some banks had negative growth of 1-5% such as SeABank, PVComBank, BaoVietBank... Along with that, there were 23 localities with negative credit growth, 29 localities with increased credit growth below 2%.

A representative of the State Bank said that this data showed that overall domestic credit demand had not had a strong recovery; Many manufacturing and service industries, which were traditional driving forces of the economy, still faced certain difficulties.

Mr. Le Ngoc Lam, General Director of BIDV, said that BIDV's credit growth updated to mid-June 2024 was 4.7%, corresponding to outstanding debt of VND 1.87 million billion, an increase of 81,000 billion compared to the end of the year. 2023. But according to Mr. VND Lam, the general rule of the economy was that credit would grow strongly in the last months of the year so it slowed down in the first months of the year. Therefore, in the first half of 2024, the economy's capital absorption capacity was still very poor, the number of dissolved businesses increased, the "health" of businesses declined, leading to a decrease in credit demand.

According to the General Statistics Office, in the first 6 months of 2024, the number of businesses withdrawing from the market was 110.3 thousand businesses, an increase of 18.4% over the same period last year; On average, nearly 18.4 thousand businesses withdrew from the market each month.

Many banks said that, with customer files consisting of businesses with foreign elements such as FDI enterprises and multinational companies, the capital absorption capacity of these businesses was also quite modest due to the driving forces of export growth, orders, and a decrease of markets causing investment motivation to slow down and capital demand to decrease, leading to credit for businesses reduce. Also on this issue, Mr. Nguyen Thanh Tung, General Director of Vietcombank, said that by the end of June 17, Vietcombank's credit increased by 2.1%. The reason of slow credit growth was personal credit - mainly loans to buy real estate - increases slowly.

Proposing to add preferential credit from refinancing sources

To promote credit, banks have offered many preferential credit packages with lower interest rates, as well as focusing on removing obstacles in accessing and disbursing capital. Therefore, with the drastic direction and actions of the Government, the Prime Minister, ministries, departments and branches in improving the business and investment environment, many banks expect better credit growth in the near future.

Mr. Tu Tien Phat, General Director of ACB, said that in the second quarter of 2024, ACB's credit doubled compared to the first quarter of this year and was expected to grow more positively in the coming quarters, so the bank was making efforts to complete the credit growth target granted of 16% by the State Bank from the beginning of 2024. At MB, Mr. Pham Nhu Anh, General Director of MB, said that credit would increase more strongly in the second, third, and fourth quarters, therefore, MB still expected the whole year credit growth target of about 15%.

Talking about the bank's solutions, Mr. Pham Toan Vuong, General Director of Agribank, said that Agribank continued to drastically implement solutions to promote safe and effective credit growth; Focusing credit capital on areas being the driving force for development... MB leaders said they would continue to adjust procedures, based on application platforms for automatic loan approval, speed ​​up the appraisal and approval process.

In a proposal for the second quarter of 2024 on a number of important topics of the economy, the research expert group of the National Economics University said that to promote credit supporting the economy, the State Bank should add a preferential credit package from refinancing sources with low interest rates for commercial banks to lend to a number of subjects and sectors that need to be prioritized and encouraged in the economy. The State Bank should also flexibly grant credit limit s to commercial banks with good credit growth ability...

The expert group also recommended that credit institutions should reduce costs to reduce lending interest rates; Urgently review projects and businesses to ensure timely credit supply for feasible and effective projects, should share and support businesses and borrowers to overcome difficulties to turn capital and pay debt. Along with that, continue to simplify loan processes and procedures, publicize fees, interest rates... to create more favourable conditions for businesses and people to access bank capital.

The good news is that recently, the State Bank of Vietnam issued Circular 06/2024/TT-NHNN amending and supplementing Circular 02/2023/TT-NHNN on restructuring debt repayment terms and maintaining the debt groups to support customers in difficulty. Accordingly, the debt restructuring time is extended, keeping the debt groups until December 31, 2024. Banks believe that debt extension is necessary to help businesses avoid being transferred to bad debt groups, thereby being able to maintain better credit relationships.

However, also related to credit, from July 1, the Law on Credit Institutions 2024 takes effect, meaning the roadmap to reduce credit limit s officially begins. In particular, from July 1, 2024 to before January 1, 2026, the credit limit  will decrease to 14% for one customer and 23% for one customer and related persons of that customer. Therefore, there are many concerns that credit granting to large corporations and businesses will be affected. But according to economic experts, in the immediate future, reducing the credit limit  by 1% within the next year will not have much impact on banks and businesses, but continuously reducing the limit  by 5-10% within the next 5 years means pressure on cutting a large amount of outstanding credit.