Banks see credit growth limit extended
Some commercial banks have seen their credit growth cap lifted for this year, the State Bank of Vietnam announced Wednesday.
The adjustments are in the range of only 1-4%, depending on each facility, as the central bank (SBV) still exercised caution over inflation risk concerns.
At the beginning of the year, the SBV had set the ceiling level for each bank to keep the limit for the banking system at 14%.
The “Big 4” - Vietcombank, BIDV, Agribank, and Vietinbank, are among the names enjoying a credit room extension this time.
Vietcombank had its credit limit extended from 15% to 17.2%. By the end of August, Vietcombank’s credit had grown 14.7% compared to the beginning of the year. Therefore, the bank can lend a maximum of about VND32 trillion ($1.35 billion) in the remaining four months.
The credit growth cap for Agribank, a wholly state-owned bank, has been lifted to 10.5% from 7%. Among banks with the largest loan balance, this bank will have about VND50 trillion ($2.2 billion) to lend from now until the end of the year.
The remaining two state-owned banks, BIDV and Vietinbank, are also allowed to widen their credit room, but at a more modest level. The credit limit extension of around 3% is quite common among small-scale private banks.
In early August, SBV Governor Nguyen Thi Hong had stated that the central would stick to its 14% credit growth cap for this year over inflation risk concerns.
She told a government meeting that quite a few banks and businesses wanted to have the ceiling on credit growth raised, but 14% was already higher than last year and the central bank had already factored in the economic recovery stimulus when determining the 14% cap.
"Vietnam’s ratio of credit to GDP is up to 124%, the highest in the world. The ratio of credit to deposit is already 99%. If the credit growth cap is raised, there is a risk of an interest rate race like in 2010-2011. In order to stabilize the exchange rate, the State Bank must stabilize credit," she said.
By the end of August, credit growth reached 9.91% - much higher than the same period of the two previous years. Many banks had recently hit the ceiling of credit growth granted since the beginning of the year, making it difficult for people and businesses to access loans.
Although the credit demand of the economy is very high after the pandemic, the central bank is cautious when setting credit limits to control inflation and stabilize exchange rates amid global economic uncertainties.
The SBV put the country's inflation target at 4% for this year. In the January-August period, on average, Vietnam's consumer price index climbed up 2.58% year-on-year.
In late July, the Ho Chi Minh City Real Estate Association had proposed that the central bank raise its credit growth cap for the year to 15-16% from the current 14%.
The association (HoREA) specifically suggested the SBV lift the credit ceiling for the “Big 4” banks, namely BIDV, Agribank, VietinBank, and Vietcombank, as well other commercial banks meeting Basel II standards.
There are concerns among developers and traders that banking credit to real estate has been narrowed down, while the corporate bond market tightened up following the cancellation of Tan Hoang Minh's nine bond issuances in early April due to its provision of "untrue information".
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