Credit expansion limit raised by 1.5-2 percentage points

The State Bank of Vietnam raised its credit growth cap for the country's banking system by 1.5-2 percentage points on Monday to 15.5-16%, citing external impacts have abated while bank liquidity improved.

The central bank said credit institutiions with better liquidity and lower lending rates will see their credit expansion limit raised.

SBV Governor Nguyen Thi Hong requested banks to give lending priorities to production, agriculture and rural development, exports, and small and medium-sized enterprises.

"Credit expansion must go hand in hand with term risk control to ensure liquidity, safety, and solvency, especially in the context of the Lunar New Year holiday drawing near," she stated in a release.

The SBV will closely monitor the situation, have solutions to support liquidity in a timely manner, even for longer-term loans, so that credit organizations can extend their credit with peace of mind, she added.

Banking credit channels are facing bottlenecks as many local banks have almost reached their credit expansion limit set by the central bank. Many companies, including producers, have complained they are struggling to access loans.

Meanwhile, the corporate bond market has been narrowed down by the government's tightened supervision over issuances of corporate bonds via private placements and market concerns following the arrest of some entrepreneurs on charges of committing fraud in this area.

SBV data shows that the economy's outstanding loans by September reached nearly VND11,600 trillion ($483.4 billion), up 11.05% compared to the end of last year.

With the credit growth limit extension of 1.5-2 percentage points, it is estimated that the credit scale may increase by VND156-200 trillion ($8.34 billion).