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Banks forecast to fall short of credit targets
The banking sector's credit growth target for the year has been trimmed and adjusted to a very modest rate of between 8 and 10 per cent, but banks are finding it difficult to realise it.
According to the latest figures released by the banking sector, while deposits increased by 10.26 per cent over last year, credit growth has been a measly 1.4 per cent by August 20.
National Advisory Council for Financial and Monetary Policy member Dr Tran Du Lich said the central bank had injected VND180 trillion (US$ 8.57 billion) into the economy by the end of July, and most commercial banks had tried their best to cut their interest rates.
However, this flow happened mainly within the banking sector and only a modest volume was being pumped into the market, he said.
Given the abysmally low figures of the last several months, the credit growth target of between 8-10 per cent that the Government has set for the year-end was almost impossible to achieve, he said.
It would require a growth rate of 2 per cent per month (equivalent to VND100 trillion) during the remaining months of the year, he calculated.
Business demand for capital often increased significantly in the final months of the year, but the rise was not expected to be as dramatic this year in light of large inventories, depressed consumer demand, and shrinking export markets, Lich said.
Exports in the first eight months of the year surged by 17 per cent year-on-year, but the rise was mainly attributable to foreign-invested enterprises, according to the General Statistics Office. While retail sales revenue during the period increased 17.5 per cent, the inventory index remained high at 20.8 per cent.
Many enterprises, already saddled with heavy debt burdens, would only be able to take out new loans if the Government forces commercial banks to refinance existing debts at lower interest rates.
Lich's assessment was made at a recent meeting between HCM City banks and enterprises that sought ways to increase borrowings.
A representative of the Bank for Investment and Development of Viet Nam (BIDV), who declined to be named, agreed that credit had grown so slowly over the last eight months that the annual target was very difficult to reach. Over the last few months, the central bank had continuously applied several methods to pump more money into enterprises, one of which was to allow 10 credit institutions to increase their allotted credit growth targets from 15 and 17 per cent to 25 and 30 per cent, he said.
Meanwhile, commercial banks have vied with each other to launch several preferential credit packages worth thousands of billions of dong with lending interest rates even lower than the rate of short-term loans.
The HCM City Development Joint Stock Commercial Bank (HDBank), for instance, has lowered its interest rate to 8.6 per cent per year for the first three months, lower than the 9 per cent fixed by the central bank for short-term loans.
However, these efforts had not produced the results hoped for, Lich said.
He said interest rates were no longer the biggest obstacle preventing enterprises from taking bank loans.
"Rising inventory is the main cause," he added.
To tackle the inventory problem, it is necessary to have measures that stimulate the market's purchasing power via Government investment channels.
For instance, funds can be set up to enable more people to buy houses on instalment plans.
If such measures were implemented strongly, they could help banks pump more money into the economy, but this should happen at a "proper level" so that inflation does not increase, Lich said.
Senior economist Dinh The Hien agreed with Lich, saying rising inventory was a national problem that needed to be tackled urgently.
If this problem was settled, enterprises wilould able to push up their production and business activities and the economy would benefit, Hien said.
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