Demand for loans increases, banks increase "quality" for credit "room"

Credit broke out right from the beginning of the year, showing that the capital flow has cleared. Photo: Agribank

Opening up capital flow

Recently, Nam A Bank signed a strategic cooperation agreement with Nam Mien Trung Group with the goal of building a value chain of Vietnam's shrimp industry of up to VND30,000 billion in the 2022-2025 period.

In addition, Nam A Bank also provides financial products and services to increase the capacity of a chain of four houses, including input suppliers (seeds, food, medicine, equipment, supplies,), breeding suppliers, purchasing, processing, exporting and importing houses.

At the same time, Nam Mien Trung Group is committed to supporting Nam A Bank in accessing and exploiting the customer ecosystem in the chain of the four houses mentioned above.

Mr. Tran Ngoc Tam, General Director of Nam A Bank, said Nam A Bank has a portfolio of nearly 10 loan products for agriculture and rural areas with over 100,000 customers nationwide, accounting for nearly a quarter of the outstanding loans balance for the whole system with preferential interest rates and flexible loan terms.

BIDV also has a credit incentive program for individual customers with a total scale of up to VND200,000 billion, flexible interest rates from only 5%/year. The credit package will be deployed from now until the end of the package to help customers develop their businesses, get consumer loans, and return to a new daily life.

Similarly, Agribank has announced a consumer credit package worth VND25,000 billion for customers who have overcome the Covid-19 pandemic to borrow loans at an interest rate of 7.5%/year through card issuance.

With other banks, ABBank offers a limit  of up to VND4,500 billion with a preferential interest rate of 7.29%/year for the first 12 months for loan documents with a term of 24 months or more. MSB grants unsecured credit lines up to VND500 million/loan to exporters; lending interest rate in foreign currency is only from 2.5%/year, equal to 5.5%/year in VND. Bac A Bank simultaneously deploys many loan incentive packages with optimal financial solutions for customers.

According to data at the recent regular Government meeting, by the end of February, credit growth was 1.82% compared to the end of 2021, higher than the same period in 2021 (up 0.66%) and about at a normal rate compared to the time before Covid-19 (credit in the first two months of 2019 increased by more than 1%). Therefore, according to experts, the credit breakthrough from the beginning of the year shows that the capital flow has been cleared, the ability of enterprises to recover after the pandemic is quite positive.

Need flexibility of credit limit 

At the recent Vietnam Business Forum (VBF) 2022, the banking working group of VBF suggested the State Bank (SBV) consider extending the credit growth limit  (room) so that banks can have plenty of room to lend and support businesses, especially small and medium enterprises when needed.

Similarly, the British Business Association (BritCham) suggested Vietnam should be more flexible in giving credit growth limit s to banks to expand business in the post-social distancing period. From the fact that British banks are operating in Vietnam, BritCham believes that this year many multinational corporations will deploy projects in Vietnam, so the credit growth limit  of each bank needs to rise.

According to the annual practice at the end of the first quarter, the State Bank will complete the allocation of credit growth targets for each bank. The general principle in the allocation of credit growth targets of the State Bank is based on the capital size, capital adequacy ratio, and customer size of each credit institution, in addition, there are other indicators including a high proportion of lending for production and business or lending to the areas the Government prioritizes for development.

In 2022, the State Bank plans to increase credit for the whole system by about 14%, with adjustments in line with developments and actual situations, in line with the Government's economic growth target of about 6-6.5%. In particular, this year, the banking system was assigned by the Government the task of providing 2% interest compensation for businesses and people doing business in the fields heavily affected by the Covid-19 pandemic and capable of restoring growth. Thus, the credit capacity will increase sharply in the coming months.

In this regard, Ms. Tran Thu Huong, Chief Strategy Officer and Head of Retail Banking Division of VIB, said that the State Bank was cautious in granting credit room at the beginning of the year. However, Ms. Huong expects that in the second half of 2022, when the economy grows well, the credit room will be widened according to demand. Therefore, banks now need to pay attention not only to how high the credit room is but also to how the credit room is used.

For example, VIB will reserve 90% of its credit room for the retail segment, compared to the industry average of about 35-40%.

However, in recent years, the credit growth limit  assigned to each credit institution is not fixed, but periodically the State Bank will review and adjust the target. Therefore, it is important for businesses to meet the requirements of banks' loan standards, and credit institutions must expand in parallel with improving credit quality, bringing capital into the fields of production and business, especially priority areas, strictly controlling credit in potentially risky areas.