The entire banking system is having to "treat" the disease of excess money.

On September 7, Deputy Prime Minister Le Minh Khai chaired a meeting on solutions to improve businesses' access to credit and increase the economy's ability to absorb capital.

Reporting at the meeting, Mr. Dao Minh Tu - Permanent Deputy Governor of the State Bank said: Never before has monetary policy management been as difficult as it is now.

He likened that the entire banking system is currently having to “treat” the disease of excess money. Just like businesses have inventory of goods, commercial banks also have inventory of money.

Recently, the State Bank and the entire credit system have continuously organized conferences to promote the connection between banks and businesses nationwide, to listen to opinions, review and perfect legal institutions in credit granting activities.

In addition, reform administrative procedures, remove difficulties, increase access to credit in the real estate sector, key agricultural products; issue policies to restructure debt repayment terms and maintain debt groups; implement interest rate support policies; reduce lending interest rates, promote communication activities, etc.

However, according to Mr. Tu, providing credit to the economy is still difficult because businesses cannot absorb capital and "do not want to borrow". "This is a very difficult problem", Mr. Tu said.

Finance - Banking - Deputy Governor: The entire banking system is having to — Deputy Governor Dao Minh Tu reports at the meeting (Photo: VGP).

A specific report by the State Bank of Vietnam said that as of August 29, 2023, economic credit reached about 12.56 million billion VND, an increase of 5.33% compared to the end of 2022 (in the same period in 2022, it increased by 9.87%).

In the past 3 years, the total credit of the whole system has increased by an average of about 1 million billion VND/year. In fact, the credit turnover of the banking system to the economy in the year is many times larger. Specifically, in 2021 it was 17.4 million billion VND; in 2022 it was 19.7 million billion VND; in the first 6 months of 2023 it was nearly 10.2 million billion VND.

According to the State Bank, in the recent past, in the context of other capital mobilization channels not really being effective, especially the capital market having some problems, causing capital demand for economic recovery to be concentrated mainly through bank credit channels, Vietnam's credit/GDP ratio has tended to increase rapidly, especially since 2020, although there are signs of slowing down in 2022, it is still on an upward trend, posing potential risks to the system of credit institutions.

In the context of excess liquidity in the credit institution system and a lot of room for credit growth (the whole system has about 9% left for credit growth, equivalent to about 1 million billion VND), lending interest rates tend to decrease, thereby creating favorable conditions for credit institutions to provide credit capital to the economy.

Therefore, the State Bank affirmed that the low credit growth in recent times was not due to the liquidity of the banking system.

According to the State Bank, the credit growth rate of the whole system is still low compared to the same period of previous years, mainly due to objective factors such as: The impact of investment, production, business, consumption; some customer groups have demand but do not meet the conditions for loans, especially small and medium enterprises; the impact from the capital absorption capacity of the real estate group...

Besides, the implementation of some credit programs (120,000 billion VND package; interest rate support program) also encountered difficulties and problems.

The State Bank's leaders said that in the context of excess liquidity in the credit institution system and still having a lot of room for credit growth, implementing solutions to increase the capital absorption capacity of people and businesses is very necessary so that credit institutions have conditions to supply capital, expand credit to the economy, and meet growth needs.

Accordingly, to improve the efficiency of businesses' access to credit capital and increase the economy's access to capital, the State Bank proposes 4 groups of solutions.

Firstly, a group of solutions to stimulate investment and consumption, promoting economic growth drivers; secondly, a group of solutions to develop various types of markets (corporate bonds, real estate); thirdly, a group of solutions to improve the capacity and ability of enterprises to absorb capital; fourthly, a group of solutions on currency, credit, and interest rates.

At the conference, representatives of commercial banks also shared difficulties with the business community, saying that in the context of abundant liquidity but credit capital not reaching the economy, "banks are also having a headache because they still have to mobilize capital and pay interest on loans, the pressure on credit growth is very large".

In fact, due to the lack of market demand, businesses do not need capital. Because if they borrow capital for production but have more inventory and have to pay interest, businesses will have even more difficulties.

Thereby, banks propose solutions related to stimulating consumption, continuing to promote public investment disbursement, restoring market confidence,... to improve the economy's capital absorption capacity.

Regarding credit, commercial banks said they can accept more risks, but must recover capital and projects must have a solid legal basis... In the context that credit-related mechanisms are "already open", banks discuss with businesses to clarify their "taste", and at the same time advise businesses on how to find a common voice .

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