The State Bank of Vietnam has increased this year's credit-growth
targets for a number of commercial banks, hoping to spur lending to
struggling enterprises dealing with high inventories and sluggish
The adjustment followed State Bank Governor
Nguyen Van Binh's announcement on August 16 that credit institutions
will be urged to help boost the nation's economic growth in the second
half of the year.
Of the nation's 62 credit institutions,
23 want to increase their credit growth quotas. The State Bank has
agreed to increase the quotas for 10 banks with lending totals in the
first half of the year outpacing quotas.
year, the State Bank divided banks into four groups depending upon their
performance in the previous year. Banks were allocated credit growth
quotas according to their group designations. Group 1 (healthy banks)
were given a target of 17 percent, while Group 2 (average banks)
received a target of 15 percent, Group 3 (below-average banks) a target
of 8 percent. Group 4 (weak banks) were not allocated a credit growth
In the first half of this year, however, credit in
the commercial banking sector grew by an average of just 1.51 percent
over the previous year, with 69 credit institutions seeing credit
decline while 57 others saw growth.
enterprises' access to credit, interest rates have also been lowered.
The proportion of outstanding loans in Vietnamese dong with interest
rates in excess of 15 percent per year has fallen to about 29 percent of
total lending, a decrease of 60 percent since the State Bank asked
commercial banks a few weeks ago to reduce interest rates on outstanding
loans to below 15 per cent.
A number of enterprises have remained reluctant, however, to take out additional loans.
"Low interest rates are no longer a vital factor in attracting
enterprises," Eximbank general director Truong Van Phuoc told the
newspaper Nguoi Lao Dong (The Labourer). "Low purchasing power has made
According to Phuoc, interest costs currently accounted for 24 percent of business expenditures.
The sharp decrease in lending rates has failed to encourage businesses
to increase borrowing because purchasing power in the market remained
depressed, economists agreed. As of the end of July, outstanding loans
at commercial banks had risen only 0.57 percent over the end of last
year, despite lending interest rates falling from an average of 17-18
percent to 10-15 percent.
Many economists have called for new policies to stimulate consumer demand.-VNA