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Banks ordered to prioritise lending for industry, farms
Commercial banks will be forced to double compulsory reserves if they fail to reduce the proportion of outstanding loans made to the non – manufacturing sector to 22 per cent by June and 16 per cent by the end of the year, the State Bank of Viet Nam ordered on Mar. 1.
The measure would prioritise lending for manufacturing, agricultural production, rural development, small – and medium-sized enterprises, support industries and exporters, while effectively limiting new consumer loans or lending for real estate or securities investment.
The State Bank yesterday also reminded commercial banks to target overall credit growth of less than 20 per cent this year, requiring any banks unable to meet such a target to report to the central bank for evaluation of the need for a higher target.
Last year, credit growth reached 27.65 per cent, overshooting a target of 25 per cent and pushing outstanding loans to 140 per cent of gross domestic product. Credit growth rose in the first two months of this year about 3.4 per cent from the end of 2010.
State Bank of Viet Nam Governor Nguyen Van Giau estimated that tighter monetary policies – targeting a growth in the M2 money supply of only 15-16 per cent this year rather than an earlier estimate of 21-24 per cent – would remove an additional VND50 trillion ($2.27 billion) from circulation and help the Government in its current battle against inflation.
Inflation reached 12.24 per cent year-on-year in February, the briskest pace in two years.
"All monetary measures at this time will focus on fighting inflation first," Giau told reporters in Ha Noi yesterday.
The State Bank has also ordered commercial banks to strengthen internal auditing, add to their risk provision funds, monitor bad debt ratios, and avoid making loan swaps to cover bad debts.
Other measures the Government has ordered to reduce the growth in the money supply and ease inflationary pressures include stabilisation of the foreign exchange and gold markets and a reduction in dollarisation of the economy by restricting the quotation of prices and trading goods in US dollars.
Giau yesterday confirmed that the central bank was drafting a decree that would ban retail trade in gold bars, estimating that hundreds of tonnes of gold was now held in private hands, putting pressure on the foreign exchange market.
A shutdown in the trade in gold bars would be done in reasonable stages to minimise negative impacts on the economy and ensure the interests of the public, he said.
"People will still be able to hold gold jewelry and processed gold products," Giau added.
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