According to updated data at the preliminary meeting of the banking industry in the first half of the year, held on June 16 morning in HCM City, up to the present time, the credit growth of the credit institution system was only reached 2.13 percent over the end of last year. This was the lowest level in many years.
Nguyen Quoc Hung, Head of Credit Department of State Economic sectors, said that the management agency followed the development of Covid-19 epidemic closely, and controlled the credit scale in line with the orientation and assurance criteria, credit quality, creating favourable conditions for companies, people to access bank capital to restore production and business quickly. However, under the impact of Covid-19, the ability to absorb money of enterprises was not high, making the credit increase low. In the first half of the year, the system-wide credit increased by 1.96 percent compared to last year and compared to the average of six months of 2019 only by half.
Regarding credit structure, Nguyen Quoc Hung said that rural credit increased by 0.3 percent compared to the beginning of the year. Export credit increased by 4.94 percent (in the first six months of this year, credit in this sector increased by over 10%). Notably, lending to small and medium enterprises decreased by 0.7%, reflecting the difficulties of this area due to the effects of the Covid-19 epidemic.
According to Nguyen Thi Hong, deputy Governor of SBV, credit growth was low in the context of economic growth affected by the Covid-19 epidemic. As businesses in many fields were severely affected, the demand for loans was not significant. At this time, the difficulty of companies and people was the cash flow, so the top priority of the banking industry was restructuring, debt extension. With businesses eligible to borrow, commercial banks were ready to meet. SBV was prepared to provide sufficient capital for the economy, in case of necessity, refinancing commercial banks to have money injected into the market. Low credit growth helped the dong’s liquidity of commercial banks be abundant, creating favourable conditions for low interest rates. Commercial banks themselves were trying to reduce costs, even cut bonuses to lower interest rates for customers, deputy Governor Nguyen Thi Hong presented.
Many commercial banks said that the dong’s liquidity was very abundant. In fact, the interest rates on the interbank market (where commercial banks borrowed capital from each other) were currently meager, such as the average interest rate for overnight, one-week, and one-month terms were only 0.35 percent per year, 0.54 percent per year and 1.51 percent per year.
Thanks to excessive bank capital, abundant liquidity, lending interest rates would continue to fall. Trinh Hoai Duc, deputy general director of Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), acknowledged that lending rates were meager. Some loans of enterprises at Vietcombank were only 4.5 percent per year, while before that, the lowest rate was from 5.5 percent per year. This was a perfect loan interest rate in the market. The problem of enterprises at this time was not how much interest to borrow, what the feasible plan for implementing the project was? The ability to absorb the capital of the new business was also important, Trinh Hoai Duc emphasized.
One of the issues agreed by the leaders of SBV and commercial banks was that although the credit capital was in surplus, the loan was not lowered. The top requirement was that customers must be able to pay debts, ensure system security, and avoid increasing bad debts. Capital flows were also directed into priority areas. Several businesses called for inaccessible capital due to inadequate and ineffective projects and business plans. The bank’s goal was to lower interest rates, not to lower credit standards, because, in the past, the rate of non-performing loans of the banking sector used to be very high. In the context of the Covid-19 epidemic, Vietcombank’s highlight was the provisioning of risks and adequate loan classification, Nghiem Xuan Thanh, Chair of Vietcombank’s Board of directors, believed.
