Businesses and local people in HCM City have had relatively low demand for capital due to the negative impact of the COVID-19 pandemic, resulting in the city’s credit growth in the first half of 2020 falling to its lowest level for many years.
According to the State Bank of Vietnam (SBV) HCM City branch, as of the end of June, the total credit balance was estimated at 2.35 quadrillion VND (101 billion USD), up 2.52 percent against the end of 2019 and a three-fold reduction compared to an increase of 7.51 percent in the same period last year.
Nguyen Hoang Minh, deputy director of the SBV HCM City branch, said the slow credit growth reflects market trends. Many sectors and businesses experienced production declines because of COVID-19 and businesses were forced to suspend operations.
Minh said the pandemic has had a negative impact on economic growth as well as the business community, including banks.
Banks face a high risk from rising bad debts, which as of April 30 accounted for 2.08 percent of total debts.
They are also experiencing other difficulties relating to the process of raising financial capacity and competitiveness, as they have had to focus resources on sharing the difficulties with the business community.
As of late May, credit institutions in the city had provided support for 223,974 customers, with total funds of over 292 trillion VND, through restructuring debts, reducing interest rates, or offering new loans.
Minh said that inspections confirm the greatest problem facing local banks is high bad debts.
Though banks are taking measures to address bad debts, following the National Assembly’s resolution on piloting the settlement of bad debts among credit institutions, the COVID-19 pandemic will have a huge impact on this process this year.
Low credit growth and high bad debts are common problems in the banking system. According to the SBV, as of mid-June, the sector’s credit growth reached 2.13 percent much lower than the 5.4 percent posted in the same period last year.
SBV deputy Governor Nguyen Thi Hong said the growth rate is acceptable amid COVID-19.
The banking sector’s liquidity remains abundant at present, she went on, adding that businesses can easily gain access to loans if they have demand and meet requirements.
The banking sector, however, will not lower lending standards to boost credit growth, she affirmed.
She added that the sector will exert every effort to bring the rate of bad debts and potential bad debts to below 3 percent by year’s-end./.
https://en.vietnamplus.vn/hcm-city-records-low-credit-growth-high-risk-of-bad-debts/177325.vnp
