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The lending interest rate has now returned to the pre-Covid-19 level, but credit growth in the first 7 months of the year has only been 4.03%, only reaching 1/3 of the 14%-15% plan for this year. To achieve the set target, from now until the end of the year, the banking system will have to inject more than 1.1 million billion VND into the economy.
Weak capital absorption
According to records at commercial banks in July 2023, lending interest rates have decreased by 0.5% -2% compared to the beginning of the year, but credit expansion in the banking system is still very difficult.
Deputy Governor of the State Bank of Vietnam (SBV) Dao Minh Tu said that the reason is due to the economic situation, businesses are facing many difficulties, lack of orders, declining exports... leading to a decline in investment and consumption demand, so credit demand is low.
“Banks really want to increase credit because it is extremely difficult to mobilize capital without being able to lend it out. The lending limit of commercial banks is still very high, however, in the current context, many businesses not only do not borrow more capital but also return previous loans. The Government and the State Bank of Vietnam are determined to find every solution to remove difficulties for businesses and promote credit in the coming time,” informed Mr. Dao Minh Tu.
In line with the national credit situation, credit in the first 6 months of 2023 in Ho Chi Minh City also increased by only 3.5% compared to the end of 2022, about 1/3 compared to the same period last year.
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SHB offers a series of preferential interest rate packages to help businesses boldly borrow capital for business purposes. Photo: MINH HUY |
According to Mr. Nguyen Duc Lenh, Deputy Director of the State Bank of Vietnam, Ho Chi Minh City branch, this growth rate is consistent with the economic growth situation of Ho Chi Minh City and the difficulties from capital absorption of enterprises, cooperatives and business households in the area. In particular, difficulties from the export market, trade, service, tourism and real estate market activities have a direct impact on credit growth.
Due to low credit growth and excess capital, commercial banks have simultaneously launched many preferential interest rate packages for both business and consumer loans to stimulate credit demand.
Specifically, SHB has set aside VND6,000 billion to encourage corporate customers to supplement short-term working capital with interest rates from 8.97%/year and VND1,000 billion for corporate customers to borrow to buy cars with interest rates from 9%-10.8%/year; MSB has promoted credit packages for business loans at 10.5%/year and real estate loans at 10.99%/year; BIDV has lent VND20,000 billion to buy commercial housing, with interest rates from 8.5%/year for investors and from 7.8%/year for home buyers; Agribank has also just reduced new loan interest rates for production and business with short-term interest rates from 5%/year and medium and long-term from 8%/year...
Loosen room, speed up lending
In the context of economic growth in the first 6 months of the year being lower than the proposed scenario, capital sources for the economy facing difficulties, recently, the State Bank of Vietnam has made an important adjustment: credit growth (room) in 2023 for credit institutions with the system-wide level of about 14%.
Accordingly, it is estimated that from now until the end of the year, the banking system will have to inject more than 1.1 million billion VND into the economy, which is double the credit level in the first 6 months of the year. Although the credit room of each bank has not been officially announced, it is known that Vietinbank, BIDV and Vietcombank have their room expanded to 14%; even two other private commercial banks have their room expanded to 23%-24%.
Faced with a series of macro-management moves on banking and finance, economic experts say that the State Bank’s allocation of all credit room in the middle of the year instead of dividing it into several phases as in previous years could help banks accelerate lending to meet the assigned growth target. However, the important issue is to improve the economy’s capital absorption capacity so that the reduction in lending interest rates can be effective.
Dr. Nguyen Duc Do, Deputy Director of the Institute of Finance and Economics - Academy of Finance, assessed that the policy of reducing interest rates only has a certain level of demand stimulation effect but is not enough for businesses to borrow capital to expand their business, because the world economy is growing slowly, exports are declining, so the demand for loans is not much; it is necessary to continue focusing on exploiting domestic demand to promote economic growth as the main direction.
Dr. Can Van Luc, chief economist of BIDV, also said that promoting public investment disbursement will play a positive role in spreading to other production and business activities, stimulating domestic consumption... In addition, the Government needs to support businesses negatively affected by the decline in exports, investment, and consumption by better exploiting signed free trade agreements, promoting trade, connecting supply and demand; at the same time, resolutely removing major obstacles and barriers for businesses today in accessing capital, legal issues, output markets...
The Government has just directed the State Bank of Vietnam to continue implementing synchronous and drastic solutions to reduce interest rates, especially lending interest rates, striving to reduce by at least 1.5% - 2%, applicable to both new and outstanding loans.
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