Vietnam can lend another $39 bln by year-end: central bank

Lending in Vietnam’s banking system has room to grow an additional 8%, or VND950 trillion (nearly $39 billion), in the remaining months of this year, a central bank official said.

Pham Chi Quang, director of the State Bank of Vietnam’s (SBV) monetary policy department, said at a Friday conference that lending was showing signs of losing steam.

Central bank data presented at the conference showed that total outstanding loans in the whole system as of October 24 had increased 6.81% from end-2022. Lending to the business sector approximated VND6,500 trillion ($265 billion), accounting for more than half of the total.

Meanwhile, as of September 29, credit growth stood at 6.91%, showing that lending had dropped 0.11 percentage points in the previous one month although interest rates on loans had fallen two percentage points against end-2022.

The SBV has set a 2023 credit growth target of 14-15%, the same as 2022.

Quang attributed the decline in credit growth to weak demand and low capital absorption of the economy with credit supply "in significant excess."

Other main factors included lukewarm investment and economic activity against the backdrop of “economic turbulences;” the inability of small and medium enterprises to meet loan eligibility conditions because of limited capability or unfeasible business plans; and stricter risk management by banks after prolonged economic stagnation.

Quang said the SBV was working on measures to have banks boost lending in the final months of this year while not lowering criteria for loan approval.

Prime Minister Pham Minh Chinh had last weekend ordered the SBV to create more favorable conditions for loan approval. He urged credit institutions to simplify procedures and bolster information technology application to further cut interest rates.