11-7-2023 (HANOI) The State Bank of Vietnam has allocated additional credit growth limits to banks, bringing the total for the year to 14%, close to the annual ceiling.
Since the start of the year, the State Bank of Vietnam has aimed for a credit growth rate of 14-15%, adjusted to match reality. At a press conference held by the central bank in late June, Deputy Governor Dao Minh Tu revealed that in February, the bank had given commercial banks a credit target of 11%. In this latest round, the regulator has allocated the remaining credit growth limit for the year to banks, bringing it up to 14%.
In recent years, the State Bank of Vietnam has often divided credit room into multiple periods, including the beginning, middle, and end of the year. It is rare for the regulator to allocate all credit growth limits in the middle of the year.
According to the State Bank of Vietnam, this allocation of credit growth limits will help banks provide timely credit to the economy. The move is part of the efforts of policy-makers to address difficulties in production and business in accordance with the government’s directives, amid lower-than-expected economic growth in the first six months of the year.
As of late June, the total outstanding loans of the entire system were VND 12.4 quadrillion, an increase of just over 4.7% compared to the end of 2022. The main reason for this is not due to a lack of credit room, but due to businesses scaling down production and business activities in the context of poor output and high interest rates. Meanwhile, at the same time last year, credit had increased by 8-9% compared to the beginning of the year, with many banks reaching the credit growth limit.
The annual credit limit allocation is based on the proposals of each credit institution, their business activities, financial capacity, management and operational expansion ability, ensuring liquidity and safe operation of the entire system.
The State Bank of Vietnam requires banks to have strong solutions to promote safe and efficient credit growth, directing credit towards priority sectors, and growth drivers in line with government policies.
In the future, the regulator said it will continue to closely monitor domestic and international market developments, ready to support liquidity to create conditions for banks. At the same time, policy-makers will monitor and review the credit growth situation of the entire system in the last few months of the year to have appropriate management solutions.
