Commercial banks plan to slow the growth of credit through the remainder of the year following significant increases in the first half, driven largely by the impact of the Government’s subsidised interest-rate loan programme.

Banks have so far lent more than 372 trillion VND (20.9 billion USD) under the programme, and credit growth has far oustripped the targets of many banks in the first six months of the year as a consequence.

Sacombank reported lending 47 trillion VND ( 2.6 billion USD) during the period, an amount equal to 85 percent of its lending target for the entire year. Asia Commercial Bank also reported exceeding targets by about 50 percent in the first half.

Eximbank said it had nearly met its 34 trillion VND (1.9 billion USD) target for the entire year, while East Asia Bank said it had met its annual credit growth target at the end of May.

In addition to the subsidised loans to businesses, banks also lifted consumer lending. State Bank of Vietnam statistics show that total outstanding consumer loans at the end of May reached 85 trillion VND (4.8 billion USD), up 11.6 percent since December.

To rein in the rapid growth of credit, banks were now saying that they would restructure lending priorities in the second half to favour production, while restricting consumer lending and speculative loans in the real estate or securities markets.

The change in priorities would help avoid overheating and minimised bad debts, said Asia Commercial Bank general director Ly Xuan Hai.

Maritime Bank deputy director Nguyen Dinh Trung said most banks were becoming more cautious about lending and risk, and the State Bank of Vietnam has ordered all commercial banks to review their consumer loan portfolios before auditing begins in mid-July.

The Government also recently ordered banks to restrict overall credit growth this year to less than 30 percent. Actual growth in the first half of the year has been estimated at 17 percent.

Average lending interest rates during the six-month period were 10.26 percent, while banks were offering interest on deposits of an average 8.26 percent, putting pressure on bank profit margins.

In a battle to attract capital to fund the expansion in credit, some banks have offered interest as high as 10.1 percent on term deposits, nearly reaching the 10.5 percent cap on deposit interest rates regulated by the central bank./.