With credit growth all over the system in the first half of April, while a few credit institutions (CIs) have provided large loans, so it is time to flexibly expand credit room.
By the end of the first quarter of 2020, credit growth was 1.3 percent compared to the same period last year. However, as of April 15, 2020, the credit grew by about 0.5%, bringing the total accumulated growth to 0.8 percent reflecting the low demand for new credit and the focus of other components in the economy shifting to repaying or maintaining existing debts.
SBV stated that for existing loans and new loans, credit institutions actively agreed to support the economy in coping with the Covid-19. Accordingly, the total amount of debt rescheduling, maintaining the group of debts and the exemption and reduction of new loan interest of credit institutions reached over 300 trillion dong. In particular, rescheduling debt repayment and keeping the debt group was 18 trillion dong, interest rate reduction, exemption and adjustment was 126.5 trillion dong, new loans reached approximately 180 trillion dong.
In the space to promote large growth of Vietnam, credit “room” for credit institutions therefore needs more flexible adjustments. Because it is noted that in a small number of credit institutions, there is a signal of nearly running out of credit room.
The reason is that the size of the total assets of these organisations is quite modest, while the rate of credit room is low. These credit institutions themselves also have close customers in the chain, according to long-term cooperation partners… Therefore, credit capital may have been prioritised to disburse for these subjects in the first quarter.
Maintaining a large partnership and disbursing capital quickly from the beginning of the year to customers in need allow the organisations to have chance to be considered by SBV to loosen new loan room this year and plan of next year. This is understandable when the revenue from traditional lending business still makes a big profit for most banks.
Given the above fact and the negative credit growth across the system in the first half of April, the management agency needs the flexibility to consider expanding the credit room.
Accordingly, with credit institutions ensuring liquidity with high CAR ratio, reaching Basel II standards but having the ability to run out of credit room early, it is possible to deploy the special lending mechanism with a controlled ratio exclusively for customers who suffer damage due to Covid-19. This loan rate is not included in the credit institution’s pre-approved credit room if the loan interest rate is really preferential to customers, and the bank is responsible for proving that the loan is for the right object to support and help circulate the cash flow of the bank, contributing to share with the whole society.
It is also a way for credit institutions not to stand outside the task of supporting the economy, showing social responsibility and true corporate accompaniment, thereby helping the cash flow continue to circulate efficiently.
