Consumer credit is the development trend of commercial banks, but it must be controlled to reduce risks related to interest rates, debt recovery and debt management methods, and to avoid bad debts.
On 23rd January, the State Bank of Vietnam (SBV), HCM City branch organised a conference to carry out the task of the banking industry of the city in 2019.
Tran Dinh Cuong, deputy director of the SBV, HCM City branch, said in 2018, outstanding loans of credit institutions in the city increased 14.69 percent over the previous year. This is the lowest increase in the last five years. However, consumer credit is on the rise trend.
In 2015, credit outstanding of consumer lending accounted for only 12.73 percent of the total credit balance in the city. This number has been increasing over the years and by the end of 2017 accounted for 18.36 percent of the total credit balance. According to Tran Dinh Cuong, it is necessary to promote this segment of credit activities, but credit institutions must ensure risk control to avoid issues related to interest rates, debt recovery and debt management methods, etc…
SBV deputy Governor Dao Minh Tu commented that the growth of consumer credit in recent years of HCM City should be taken care of. In fact, the pressure to invest capital for different segments is very large. According to Tu, credit growth in some areas such as consumption and real estate has been increased rapidly since people have shifted the flow of money from savings to land investment, but the growth rate need to be controlled. SBV is also considering home loans for low-income people, in which the question is such loans should be considered consumer loans or real estate loans.
“The lessons from the bubble period of too hot real estate market over ten years ago are still there, and during the last five years, the banking sector has not completed handling all the consequences. Therefore, the policy of SBV is to control the credit into real estate, and direct capital flows into production and businesses,” the deputy Governor emphasized.
In 2019, commercial banks are required to expand and increase credit safely and effectively in accordance with the orientation of SBV and control bad debts well. In order to control the on-balance sheet nonperforming loan ratio at less than three percent and the ratio with off-balance sheet bad debts, debts sold to Vietnam Assets Management Company (VAMC), and potential debt, structured debt inclusive at less than five percent including off-balance bad debts, debt sold to Vietnam Credit Institutions Asset Management Company (VAMC), it requires the support from the policy mechanism, advantages of the real estate market, and credit efficiency.
Deputy Governor Dao Minh Tu stated that bad debts are still under control, especially with credit growth quality. Credit growth in 2018 was at 14 percent and the economy still grew well, so this year SBV requested to continue controlling credit at this level.
