Expert: Credit growth target hard to achieve
By Thuy Trieu - The Saigon Times Daily
|
| Le Duc Thuy (R), chairman of the National Financial Supervision Commission, at the investment conference in HCMC on Thursday - Photo: Thuy Trieu |
HCMC – While the State Bank of Vietnam is targeting 25% credit growth for this year, experts have said achieving this goal will prove to be tough given the current bleak business outlook.
Speaking at an investment conference in HCMC on Thursday, Le Duc Thuy, chairman of the National Financial Supervision Commission, said inflation was not a big concern given the measures taken by the central bank in the first half of the year.
A major challenge now is to recover rather than harness credit growth, Thuy told the conference organized by Nhip Cau Dau tu magazine.
He said January-June credit growth was slower, especially for loans in Vietnam dong. In the year to end-June, credit in the banking system had expanded 10.52% but outstanding local currency loans had risen only 4.6% while credit growth in foreign currency, mainly the U.S. dollar, was 27%.
“There is no more room to scale up outstanding loans in the dollar in the rest of the year because dollar mobilization growth in the first half was far lower than credit growth,” he noted.
Meanwhile, there is no scope for increasing loans in Vietnam dong as falling deposit rates as a result of inflation concern have driven depositors away and lending rates have remained high.
According to Thuy, an average lending rate for Vietnam dong this time around ranges from 14% to 16% a year. “Many banks have said they are offering funds at 12.5% to 13% but few enterprises have been able to access such cheap funds because of strict lending conditions.”
Thuy said the central bank had tightened monetary policy a little bit in the first half, leading to credit growth slowing. The result is growth in investments by non-State enterprises was lower the 54% recorded in the same period last year.
“Private enterprises are in need of capital and this capital shortage means it’s hard to achieve the Government’s economic growth target of 6.5-6.7% this year. If the country can somehow attain that target, the pace of recovery will slow down in 2011,” Thuy said.
Dam Bich Thuy, CEO of ANZ Vietnam, said the Government wanted commercial banks to lower their lending rates by cutting deposit rates but the latest regulations hammered out by the central bank had made the lowering of interest rates difficult.
The regulations do not allow banks to borrow money on the inter-bank market at 20% higher than the deposit rate offered to the public, as well as ensure a fixed ratio between deposits and loans.
Thuy said the inter-bank market was where banks could address their immediate capital needs but this did not work any more since the central bank regulations did not permit banks raise funds from the inter-bank market at 20% higher than deposit rates.
So interest rates on the inter-bank market are not attractive compared to deposit rates.
Once small banks cannot borrow cheap money from the inter-bank market, they have resorted to deposit rate hikes to lure funds from the public. If small banks do not lower interest rates, bigger banks cannot do it either. Therefore, the possibility of interest rates declining will not be high, Thuy said.
A representative from ANZ predicted lending rates for Vietnam dong would hover around the current level in the next two or three months.
Thuy also pointed out some inappropriate regulations, citing a rule that bans foreign banks from giving out loans based on its parent bank’s capital resources; it could only make a loan equivalent to 15% of its equity in Vietnam for a single client.
He said that only if the central bank made changes to those regulations in July or August, the prospect would be better in the second half of the year.