Credit growth in holding pattern

Local currency credit disbursement is growing slightly though banks have pulled down lending rates.

According to State Bank figures, the banking sector saw an estimated credit growth of 8.85 per cent as of August 30, 2011 against the end of 2010, lower than 16.9 per cent in 2010’s corresponding period.

Some bank executives said though the dong lending rates were relaxed to 17-19 per cent per year, firms assumed such rates were still beyond their scope.

Soc Trang province’s Ut Xi Aquatic Products Processing deputy director Nguyen Tuan Anh said production and export firms expected lending rates to further drop to 14-15 per cent, per year as current rates were too high.

“Firms can hardly maintain operations with such high lending rates. Besides, banks have lifted dollar-lending rates to 6.5-7.5 per cent, per year instead of 4.5-6 per cent, per year. High interest pressures hurt firms,” Anh said.

Reality shows that banks have been cautious in lending to reduce bad debt rates since they fear enterprises’ health had been weakened in the face of economic vulnerabilities. They just focus on lending to production and trading export firms and the agriculture and rural areas.

An Eximbank representative said from mid September the bank could disburse around VND500-600 billion ($24.1-$29 million) out of VND3 trillion ($145 million) set aside to lend firms at preferred interest rate of 18 per cent, per year.

Nam A Bank earmarked VND500 billion to VND1 trillion ($24.1-$48.3 million) to lend import-export, agricultural and rural area firms with concessionary rates of 17-18 per cent, per year against normal rates of 20-21 per cent, per year.

However, disbursement remained modest at bank until present, according to a bank representative.

Corporate customers are cautious with their borrowing decisions and await further market movements, according to TienPhong Bank’s general director Vu Tu.

“Lending rate factors are important, but not decisive to control firms’ production and business activities in 2011’s remaining months. Besides, since the high lending rates stay for a long period of time, implications on firms cannot vanish overnight,” said Tu.

Source VIR

Tags: Vietnam banking industry, Vietnam credit growth, Vietnam finance, Vietnam financial