Year-end credit growth problems

Banks have repeatedly reduced interest rates and launched preferential credit packages to stimulate credit demand. Photo: SHB

Credit balance is more than 700,000 billion VND 

According to data from the State Bank, as of November 23, 2023, outstanding debt of the entire system increased by 8.38% compared to the end of December 2022, reaching 56% of the level assigned by the State Bank to credit institutions. As a result, the remaining room for the entire system for credit institutions to expand credit growth is very large, nearly 6.2%, equivalent to about 735,000 billion VND to provide credit to the economy. Therefore, from the beginning of December, the State Bank decided to extend the credit growth limit  (room) for banks openly and transparently according to specific principles and criteria.

Accordingly, banks whose credit balance has so far reached 80% of the announced credit target will be proactively added to the increased limit  based on the 2022 rating. At the same time, banks that focus credit on the Government's priority areas and lower lending interest rates to low levels recently will be offered priorities. The State Bank emphasized that the addition of this limit  is the initiative of the State Bank so there is no need to submit for additional amount requests. This is the third time the State Bank has granted credit room to banks since the beginning of the year. Previously, by July 2023, the SBV had allocated credit limit s to the entire credit institution system with a total growth rate of 14.5%. In fact, to boost loan capital and promote credit growth, banks have continuously launched incentive programs, repeatedly reduced interest rates as well as sought customers.

For example, in November, MSB reduced lending interest rates for the 5th time since the beginning of the year. Accordingly, customers asking for mortgages to buy a house, repair a house, household equipment, study abroad... will receive loans with interest rates from only 6.8%/year, fixed for 12 months. Similarly, SHB has also announced a continued reduction of up to 2%/year lending interest rates for existing customers including both individual and business customers. Especially, in responses to high capital demand at the end of the year, SHB prioritizes supporting interest rate reduction for business customers operating in priority fields... Previously, SHB also spent VND 5,000 billion with interest rates from 6.97% to support businesses in needs of short term working capital and set aside VND 1,000 billion in preferential interest rates for business car loans with loan terms of 36 months or more... BIDV also reduced interest rates for individual customers in need of business and consumer loans from 5.4%/year for a term of less than 6 months, from 6.4%/year for terms of 6-12 months. As for consumer loan interest rates, BIDV applied only from 6.5%/year. Even from the beginning of December, Sacombank deployed a credit package of VND 10,000 billion for businesses with short-term loan interest rates from 3%/year to over 5.5%/year...

According to current records, credit growth among banks is strongly differentiated from less than 5% to more than 20%. According to the financial report for the first 9 months of 2023, VPBank increased credit by 17.1% compared to the beginning of the year, MSB grew by 16.3%, MB increased by 13.7%, Techcombank increased by 13.5%... but Vietcombank , ABBank, BacABank recorded a growth rate of 2-5% compared to the end of 2022. 

Synchronize to solve the credit "problem" 

At the recent meeting with the Government on credit management, representatives of some banks expressed that banks do not lack capital. However, in order to inject capital into the economy and ensure credit growth targets, not only the management of monetary policy, credit or credit room but also the economy's ability to absorb capital must be implemented in parallel.

According to bank representatives, in the current context, all customer segments are severely hit, so credit disbursement is a "difficult problem". Therefore, banks believe that solving the credit "problem" requires synchronous solutions from all levels and sectors, and the efforts of businesses to improve their capital absorption, just like “cannot clap with one hand". It is necessary to resolve legal problems related to real estate projects; deploy solutions to stimulate domestic consumption; promote disbursement of public investment capital to lead investment...

The good news is that in the last months of 2023 and early 2024, many positive signals have come to businesses. The representative of the Vietnam Textile and Apparel Association (Vitas) said that the number of export orders of the industry has grown again from the fourth quarter of 2023. Similarly, according to a representative of the Vietnam Leather, Footwear and Handbag Association (Lefaso), the order growth rate returning is not the same as in 2022, but it is also a positive sign amid the gloomy period of 2023.

According to businesses, only when they have output for their products will they need to borrow capital. However, many businesses expressed that the banking industry needs to make more efforts in reducing interest rates as well as loosening lending standards and regulations on collateral to make it easier for businesses to access credit. In recent instructions, the Prime Minister also requested the State Bank to continue to direct credit institutions to reduce costs, simplify lending procedures and conditions and lower lending interest rates. , especially the support packages of 120,000 billion VND for social housing and 15,000 billion VND for the forestry and fisheries sectors. The State Bank said it will continue to manage credit growth in 2023 within the determined target but still ensure growth space to meet the credit capital needs of the economy and the safety of the banking system.