The country’s credit growth is expected to reach 10 percent by
year-end, lower than the target of 12-14 percent, said new Deputy
Governor of the State Bank of Vietnam (SBV) Nguyen Thi Hong.
Vietnam ‘s credit is estimated to grow by 4.5 percent and its
deposits, by 8.21 percent, by late August, she revealed at a conference
held in Hanoi on August 29 that reviewed eight months of the banking
sector’s operations.
Hong explained that credit growth in
August was 3.68 percent higher than that in July but remained lower
than that in the same period last year.
As of August 21, the
total means of payment rose by 8.86 percent while deposit growth rate
went up by 8.21 percent, with deposit in dong rising 8.77 percent and
deposit in foreign currency going up by 4.2 percent compared to the same
period last year.
The liquidity of credit institutions
remained abundant and the interest rate of the inter-bank market was
stabilised at a low level.
Hong said the lending rate of credit institutions was expected to decline by 0.5 to 1.5 percent in 2014.
Currently,
credit institutions have adjusted the interest rate of old loans. As of
August 14, outstanding loans in dong with an interest rate of more than
15 percent accounted for 4.45 percent of the total number of loans,
while outstanding loans with an interest rate of more than 13 percent
accounted for 12.45 percent.
The SBV Deputy Governor also
revealed that Vietnamese commercial banks’ bad debt ratio rose to 4.84
percent by late June 2014, representing a 3.61 percent increase from
that of the same period last year.
She attributed the
increase to sluggish production and business, resulting in a delay in
debt payments for a number of businesses, and the implementation of new
debt regulations in SBV’s Circular No 09/2014/TT-NHNN on the
classification of bank risk.
The circular, which deals
with the classification of bank assets, the setting up of risk
provisions and the manner by which provisions against credit risks are
to be deployed, will force an increase in risk provisioning, according
to Hong.
It will also allow the banks to continue
restructuring existing loans and retain them in the same debt group
until April 1, 2015, instead of reclassifying them by using more
rigorous standards by June 1, 2014, as previously planned.
At
the conference, the Chairman of the Vietnam Asset Management Company
(VAMC) told reporters that since October 2013, his company had purchased
58.9 trillion VND (2.8 billion USD) worth of bad debts from 35 credit
institutions.
In 2014 alone, VAMC purchased bad debts worth 19.6 trillion VND, but this indicated a decline in the number of such purchases.
The
VAMC Chairman explained that the purchase of bad debts formed part of a
roadmap and plan to restructure the non-performing loans of credit
institutions. He added that his company has to consider the quality of
bad debts before making the purchase.
Explaining why
purchased bad debt was lower than total non-performing loans (NPLs) of
the banking system, Hong said VAMC is not a “magic wand” to be used in
the handling of NPLs.
The SBV Deputy Governor explained
that VAMC’s handling of NPLs aims to encourage credit institutions to
offer more loans and reduce interest rates for lending in order to
assist businesses.
Hong said the SBV will continue to
boost the process of handling NPLs and ask credit institutions to
enhance risk provisioning and use it in handling bad debts.-VNA