Banks expect 2013 to be a difficult year

At a conference in Ho Chi Minh City on January 21, Nguyen Van Binh, Governor of State Bank of Vietnam, reflected that in case the economic growth in 2013 is 5.5 to 5.7 percent and inflation rate lower than 6.8 percent, the target of credit growth set for 2013 will be 12 to 13 percent.

According to Governor Nguyen Van Binh, the Central Bank monetary policies in 2013 were very cautious and flexible, focusing on curbing inflation and stabilizing macro-economic development.

The Governor said this year the Central Bank could provide capital for credit institutions at more reasonable interest rates to boost lending in priority sectors.

Binh explained that reducing the lending interest rate below 10 percent per year would encourage businesses to take out loans to expand their production and business.

The Governor predicted that the lending interest rate might go down rapidly in time to come, but also warned about the return of inflation in Vietnam due to loose monetary policies early this year, saying the Central Bank will remain cautious.

The Central Bank confirms that there will be no ceiling interest rates applied on all borrowers. Rather, interest rates will apply to specific sectors. For instance, sectors benefiting from priority policies will enjoy a 12 percent lending interest rate per year.

At the same time, to handle difficulties in the real estate market and bad debt problems, the Central Bank is expected to lend VND20-40 trillion ($80-190 million) to individual home buyers this year to stimulate housing demand.

To Duy Lam, director of the State Bank branch in HCMC, said business in 2012 dropped considerably.

Dealing at Eximbank (Photo: SGGP)

Revenue of all credit institutions in HCMC in 2012 totaled only VND667 billion, down sharply from 2011, only 4.4 percent as compared with 2011.

Yet Lam also warned that given the current climate of mounting bad debts and inventories and low purchasing power, banks needed to be careful when giving out loans.

In 2013, capital was likely to focus on key industries such as exports, manufacturing and trading, he said.

Meanwhile, commercial banks are trying to increase credit growth this year as the State Bank has given them a target of 12 percent.

Tran Anh Tuan, director general of Nam A Bank, said his bank was not worried about reaching this target.

According to Tuan, this was the first year the Central Bank did not set an individual target for each bank's credit growth. Rather, the bank has lifted the lending rate limit for non-manufacturing sectors.

According to several economists, people believe this will be a chance for banks to boost their credit growth in 2013.

Banks with good liquidity and abundant capital reserves, as well as strategies to provide individual home loan programs, would be at a particular advantage.

The director general of Eximbank said his bank would set aside VND5 trillion for an individual home loan mortgage program with a preferential interest rate of 12 percent per year.

"The interest rate would remain the same for the first two years," he said, adding the bank would accelerate disbursement under the program this year.

HCMC vice chairwoman Nguyen Thi Hong said the fact that the Central Bank had nailed down explicit credit policies to provide lending to non-manufacturing sectors, especially the real estate sector, offering a good opportunity for banks to boost their lending.

Meanwhile, Dr Tran Hoang Ngan, member of the National Financial and Monetary Policy Advisory Council, said the housing market would warm up after the Central Bank nailed down explicit policies to support this field.

Ngan, however, suggested lending rates to be set at 5-6 percent to support individual home buyers and thaw the frozen property market.

Source SGGP, translated by Dan

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