Nghe An: Bank credit growth is strong.

Credit growth is strong.

According to reports fromState Bank of Vietnam, Nghe An BranchAs of June 30, 2022, mobilized capital was estimated at VND 192,566 billion, an increase of VND 17,100 billion (9.7%) compared to the beginning of the year. Total outstanding loans of credit institutions and their branches in the area were estimated at VND 266,479 billion, an increase of nearly VND 24,000 billion (9.8%) compared to the beginning of the year. Excluding the Development Bank, outstanding loans were estimated at over VND 254,000 billion, an increase of VND 25,519 billion (11.1%) compared to the beginning of the year, higher than the same period in 2021 (3.4%).

Specifically: Outstanding loans to the agricultural and rural sector across the entire region amounted to VND 118,121 billion, accounting for 44% of the total outstanding loans; outstanding loans for the development of high-tech and clean agriculture under Resolution 30 reached VND 20,295 billion, accounting for 8%; outstanding loans for exports totaled VND 2,700 billion, a 2.6% increase compared to the beginning of the year. Outstanding loans under Decree 67 amounted to VND 210 billion; outstanding loans for housing support under Decree 02 amounted to VND 170 billion. Outstanding loans for policy programs through the Social Policy Bank totaled VND 10,420 billion, accounting for 4% of the total outstanding loans across the region.

Bank financing is facilitating the recovery of individuals and businesses after the pandemic and the development of production and business activities. Photo: Thu Huyen

Credit institutions and their branches strictly implement the State Bank of Vietnam's directives on interest rates. The average interest rate for VND deposits fluctuates slightly, with the maximum interest rate for demand deposits and deposits with maturities of less than one month being 0.2% per year; the maximum interest rate for deposits with maturities from one month to less than six months being 4%; and specifically, People's Credit Funds and Microfinance Institutions apply a maximum interest rate of 4.5% per year for deposits with maturities from one month to less than six months.

The maximum short-term lending interest rate in Vietnamese Dong for credit institutions to borrowers meeting capital needs for certain economic sectors and industries as stipulated in Circular No. 39 is 4.5%/year; for People's Credit Funds and Microfinance Institutions, it is 5.5%/year. For other sectors, the current prevailing interest rates applied by banks for short-term loans range from 6% to 9%, and for medium and long-term loans from 9% to 10.8%.

According to the leader of the State Bank of Vietnam's Nghe An branch, theCredit growth is strong.This has supported the economic recovery. Conversely, the strong economic recovery has increased the demand for credit to serve the development of production and business activities of enterprises and the consumption of households. Currently, banks are focusing on providing loans with a 2% interest rate subsidy (Government Decree 31/2022/ND-CP, Circular 03/2022/TT-State Bank of Vietnam guiding the implementation of Decree 31) from the state budget for priority sectors, including those severely affected by the pandemic such as transportation, aviation, accommodation services, tourism... with a total scale of VND 40,000 billion and effective until the end of 2023.

Furthermore, the banking sector is also implementing the Digital Transformation Plan for the banking industry; promoting the implementation of the cashless payment scheme in the area; ensuring the security and safety of information technology operations, electronic payments, and card payments. It is also promoting the application of technology in banking operations, fostering the development of digital banking, digital payments, payments through card acceptance devices at points of sale, and applying modern payment technologies and methods such as QR codes and mobile payments.

Continue to improve credit quality and support economic recovery.

According to Mr. Cao Song Diep, Head of the General Affairs Department of the State Bank of Vietnam's Nghe An branch, the current upward trend in domestic and international fuel prices, conflicts in some countries, and high inflation in some countries have directly impacted monetary policy management. Despite pressure from the global trend of monetary easing and rising interest rates, the State Bank of Vietnam continues to maintain its policy interest rates to facilitate access to capital from the State Bank at low costs for credit institutions, thereby enabling them to reduce interest rates.Loan interest rates to support customers in recovering production and business..

The State Bank of Vietnam will continue to strengthen its monitoring of loan growth rates, especially in high-risk sectors. Photo: Thu Huyen

Credit growth exceeded expectations and was higher than the same period last year, reflecting the positive recovery of the economy, the effectiveness of the government's pandemic prevention and economic recovery measures, and the efforts of businesses and credit institutions in the province. However, some banks stated that they have met their credit growth targets and are requesting an increase in credit limits and the removal of obstacles in lending activities.

The leader of Vietinbank's Nghe An branch stated: Currently, credit growth is quite strong, reaching 15-17% this year. Along with implementing solutions to boost credit growth, we focus on controlling credit quality; prioritizing lending to production sectors and priority areas; and strictly controlling lending to sectors with potential risks. This year, the economy's capital needs are very high, and sectors affected by the pandemic are beginning to recover. There is not much room left for banks to lend, therefore, we hope to have our credit growth limit relaxed.

Expanding credit limits helps facilitate access to bank capital for individuals and businesses, especially through ongoing support packages. Photo: Thu Huyen

Regarding the issue of credit limit allocation – a mechanism for assigning credit targets that the State Bank of Vietnam has implemented for many years – many banks argue that this mechanism resembles a "request-and-grant" subsidy-style management system, no longer suitable for the current context, and wish to have the credit "room" allocation for banks abolished. "The government needs to study limiting, and eventually eliminating, the management and allocation of credit growth targets to each bank," said a bank representative.

It is known that recently, the National Assembly passed a Resolution on questioning at the 3rd session, which, regarding the banking and finance sector, requested the Government to study limiting and eventually eliminating the allocation of credit growth targets to each bank. Instead, the Government should develop criteria and methods for determining credit growth targets for each bank based on its operational situation, financial capacity, management, and ability to expand credit healthily. This aims to ensure transparency, compliance with the Capital Adequacy Ratio (calculated according to Basel II) and international standards in the banking sector. It also calls for strengthening measures to closely monitor the growth rate of outstanding loans and the quality of credit in high-risk sectors, especially real estate investment and business, securities, and corporate bonds; while simultaneously ensuring the supply of capital for the healthy and sustainable development of the securities and real estate markets.