Credit predicted to grow at faster pace

Hanoi (VNA) - Credit would increase faster in the next few months thanks to new regulations on lending, experts have forecast.

This year, the government is targeting a credit growth between 18 percent and 20 percent. However, lending rose only 4 percent by the end of April and then slipped back to about 3.8 percent by the middle of May.

However, after the issuance of new lending regulations recently, the Bao Viet Securities Company forecast that lending in both the dong and the United States dollar would receive a boost in the next few months.

On May 30, the State Bank of Vietnam (SBV) issued Circular 06/2016/TT-NHNN which raises the risk index of receivable lending for real estate and securities from the current 150 percent to only 200 percent, lower than the cap of 250 percent as proposed earlier by the SBV.

On the same day, the central bank also issued Circular 07/2016/TT-NHNN to supplement and amend some articles of the Circular 24/2015/TT-NHNN on providing foreign currency loans by credit institutions and foreign bank branches. Under the new regulation, from June 1, companies who have demands for short-term loans in foreign currency can borrow from banks to satisfy their short-term capital needs.

However, BVSC analysts also anticipated that the credit growth this year would be lower than the government’s plan, fluctuating between 15 percent and 17 percent as banks would be more careful with lending related to the areas with high risk loans such as real estate.

Dinh Duc Quang, deputy general director of Ocean Commercial Bank, said commercial banks tend to search the loan portfolio more stringently, especially after warnings about being careful of the growth of the real estate market.

Under a report released recently, the Institute for Economics and Policy Research (VEPR) also recommended to the central bank that it control credit growth and quality. It also suggested to the central bank to avoid maintaining a loose monetary policy for too long, which led to the formation of asset bubbles.

Concerning the return of high inflation, VEPR said that a credit growth target of 18 percent in 2016 is too high, suggesting that the central bank should consider a credit growth target for 2016 at 15 percent with credit flows aimed at the production areas.-VNA