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Banks call for credit growth limit increase
The Saigon Times Daily
Monday,  Aug 13, 2018,17:13 (GMT+7)

Banks call for credit growth limit increase

The Saigon Times Daily

A bank teller holds piles of cash. Commercial banks have proposed the central bank increase credit limits - PHOTO: THANH HOA

HCMC - In the first half of the year, many commercial banks almost reached the lending cap set for the whole year by the State Bank of Vietnam (SBV). They have now requested SBV, the nation's central bank, to set higher credit limits, reported Lao Dong newspaper.

SBV had earlier set the credit growth target for 2018 at 17% but then set the maximum credit growth rate for banks at 14%.

Most of the banks recorded credit growth rates of 9-12% in the first six months, with some banks even exceeding the quota to reach 16%.

If the central bank agrees to increase the lending limit, the cap should not exceed 17% to ensure macroeconomic stability, control inflation and stabilize the exchange rates. However, the proposal to raise the credit growth limits for banks cannot be approved easily, according to an SBV representative.

An increase of credit growth limits for commercial banks will be based on their operations, their compliance with regulations to ensure the safety of the banking sector and their capability to offer loans to the priority sectors.

Economic experts believe SBV may refrain from hiking the lending cap this year as it is under less pressure to boost credit growth.

Experts from the Banking University of HCMC said that as of June, credit grew by 6.5% against the end of last year. The country’s credit-to-gross domestic product (GDP) ratio has plunged since the second quarter of 2016, thanks to the effective control of credit growth.

If the nominal GDP reaches 11% this year, equivalent to the real GDP growth rate of 7%, and credit grows at 15-17%, the credit-to-GDP ratio will be 4-6%, which is reasonable for a developing country like Vietnam.

According to a report by the National Financial Supervisory Commission, in the year to late June, deposits at commercial banks expanded by 8% over the end of last year, while credit went up 6.5%.

Data from SBV showed that in the first half of the year, loans were mainly provided to priority sectors such as processing-manufacturing, agriculture-rural development and small and medium enterprises, up by 7.7%, 7.2% and 3%, respectively. Meanwhile, the total value of loans for the real estate sector grew by 3.7%.

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