Commercial bank lending in USD up in first quarter

Commercial bank lending in US dollars grew by over 14 percent in the first quarter, much higher than the credit in Vietnamese dong, which grew by just 0.57 percent, according to a report by the Ministry of Planning and Investmen.
Commercial bank lending in US dollars grew by over 14 percent in the first quarter, much higher than the credit in Vietnamese dong, which grew by just 0.57 percent, according to a report by the Ministry of Planning and Investmen.

Total credit growth in the first quarter was 2.95 percent, the report said, noting that much higher credit growth in USD was a phenomenon rarely seen in recent years.

Lending interest rates at 14 commercial banks on April 1 ranged from 5.5 to 8 percent per year for USD, compared to a whopping 16-20 percent per year in negotiated rates for medium- to long-term loans in VND.
Given that credit growth skyrocketed by nearly 38 percent last year under the subsidised-interest loan programme, the relatively more modest growth in dong denominated lending so far this year becomes less surprising.

Plus, the overall total of USD loans remained modest compared to total lending, noted Nguyen Viet Khoa, a credit official at Vietcombank.

“The increase is normal and definitely not a sudden increase since, in the previous month, dollar loan growth was too low,” added Asia Commercial Bank, deputy general director Nguyen Duc Thai Han.
Some are concerned over how banks could make more loans in USD even as their rate of attracting USD deposits rose by 0.21 percent in the year’s first three months.

“That’s because many banks lend USD borrowed from the interbank market,” Han explained.

The Central Institute for Economic Management official predicted that, in the second quarter, credit growth would slow since the central bank is holding the line on the prime rate and has yet to signal any further tightening in monetary policy.

The Government has set a target for credit growth during all of 2010 of 25 percent, while first-quarter growth was just 2.95 percent.

“There’s still a lot of room for banks to do business,” he said./.

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