31 banks will have their credit room increased.
Bank credit growth as of August 28 was 6.63% compared to the end of 2023, 0.97% higher than in July (only 5.66% compared to the end of 2023). Although it has returned to positive after the decrease in July (up 6.1% at the end of June), the increase of 6.63% is still not even half of the 2024 plan of 15%.
According to the assessment of the State Bank of Vietnam (SBV), credit growth of the entire banking system is still much lower than the target set at the beginning of the year. The credit growth of banks is uneven, with some banks experiencing low growth or even negative growth; while some banks have increased close to the target announced by the SBV since the beginning of the year. Therefore, in order to implement the direction of the Government and the Prime Minister on flexible, effective and timely credit growth management, meeting credit capital for the economy and controlling inflation, stabilizing the macro economy, the SBV has proactively adjusted the credit growth target for banks. From August 28, banks with a credit growth rate in 2024 reaching 80% of the target assigned by the SBV will proactively adjust to increase their credit balance. The formula for adjusting additional credit growth is credit balance on December 31, 2023 x 2022 ranking score x 0.5%.
The bank automatically increases the credit limit when it exceeds 80% of the target.
According to published data on credit growth of banks in the first 6 months of the year, the credit growth rate of many banks is high compared to the end of 2023, such as LPBank (up 15.2%), Techcombank (14.2%), ACB (12.8%), HDBank (12.6%), MSB (10.7%), Nam A Bank (10.7%), MB (10.3%), VPBank (10.2%), VietBank (10.2%), KienlongBank (10%), Vietcombank (7.8%), Eximbank (7.7%), Sacombank (7%), Vietinbank (6.7%)…
With this growth rate, some banks’ credit growth above 80% of the assigned target (for example, Vietcombank reached 96% of the plan) will be allowed to self-adjust credit growth. According to private sources, in this period, 31 banks and 1 financial company were allowed to increase their credit limit compared to the target assigned by the State Bank at the beginning of the year.
1,135 trillion VND difficult to absorb in the last 5 months of the year
With a credit growth plan of 15%, the banking system will have to pump VND2,035 trillion into the economy in 2024. However, in the past 8 months, the amount of capital put into the market has not reached VND900,000 billion, an average of VND112,500 billion per month. Thus, the banking system will have to push out the remaining capital of VND1,135 trillion in the last 5 months of the year, an average of VND227,000 billion per month. This growth rate is double that of the first months of the year, so this is a huge challenge for the banking industry.
According to the results of the business trend survey conducted by the State Bank, in the first quarter of 2024, banks expected the credit ratio in 2024 to reach 14.2%, but by the second quarter of 2024, this figure dropped to 13.6%, lower than the target. Banks also said that in 2024, overall credit risks will continue to increase, in which the two areas forecasted to have the highest potential credit risks are still real estate investment loans and securities investment loans. To achieve a credit growth rate of about 15%, in the remaining months of the year, the banking system will have to make great efforts to provide the economy with a suitable amount of credit capital to meet production, business and consumption needs while still controlling credit risks.
Dr. Nguyen Tri Hieu, a financial expert, is not very optimistic about pumping the remaining 1.1 million billion VND for the last 5 months of the year. Earlier this year, Mr. Hieu expected that credit growth in 2024 could reach 15%, but up to this point he admitted that it was “very difficult”. Because the health of businesses and individuals has not yet had a breakthrough, and the world economic conditions are not optimistic, it is not necessary to increase credit growth at all costs. Because a large amount of credit capital accelerated in a short period of time, meaning the average credit level each month at the end of the year doubles compared to the first months of the year, will easily cause inflation, capital flows into speculative channels such as gold, real estate, etc.
According to Mr. Nguyen Tri Hieu, the adjustment of credit limits of banks is also proof that it is time to stop credit management by granting limits. Many years ago, banks had quite strong credit growth, in some places over 50% because banks with high credit growth also had high profits. However, in recent years, credit growth has been very difficult, not as easy as wanting to increase.
“The problem here is that credit control is based on indicators and targets that banks must meet. For example, how can banks increase credit growth while still ensuring capital safety at a rate of 8%, ensuring the ratio of outstanding credit to mobilized capital of 80%, the ratio of short-term capital for medium and long-term loans, as well as controlling the lending ratio of related parties… Therefore, the State Bank does not need to manage administratively in the form of granting annual credit limits to banks,” said Mr. Nguyen Tri Hieu.
Sharing the same view, Associate Professor, Dr. Nguyen Huu Huan (Ho Chi Minh City University of Economics) said that if the credit growth target is pushed to the last months of the year as happened in 2023, the situation of negative credit growth will repeat itself in the first months of the following year. Such a credit growth rate is not stable. With the current economic growth rate, the capital demand of businesses and individuals is still not high; especially businesses in the production, business and export sectors, so credit growth should not be increased at all costs. Regulating credit limits from banks that cannot lend to banks that are growing well is close to the market, showing that the credit growth capacity of each bank is different, so there are also different growth rates. Although it is an administrative measure, removing credit limits for banks needs to have a specific roadmap. Because current monetary policy tools are not effective in regulating the market (including required reserves, open market operations, and the State Bank’s operating interest rates).
In addition to adjusting the credit growth rate, the State Bank also requires banks to increase credit safely, effectively, and healthily, limit the increase and occurrence of bad debts, and ensure the safety of credit institutions’ operations. Direct credit to production sectors, priority sectors, and sectors that are the driving force for economic growth according to the policies of the Government and the Prime Minister; strictly control sectors with potential risks. At the same time, continue to maintain stable deposit interest rates and strengthen the implementation of solutions to reduce operating costs, simplify lending procedures, apply information technology and digital transformation to reduce lending interest rates. Comply with regulations on safety ratios, credit limits for customers, debt classification and risk provisioning, foreign exchange, risk management and bad debt control; Strengthen credit risk control measures, strictly assess before granting credit, strengthen inspection and supervision before and after granting credit to ensure credit quality.