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Since the beginning of the year, credit for risk areas has been strictly controlled and is under control of the State Bank of Vietnam.

Accordingly, after the National Assembly Resolution No. 42/2017 / QH14 on piloting bad debts of credit institutions, the difficulties in dealing with bad debts have gradually been resolved. As a result, the bad debt process has achieved positive results. By the end of March 2018, the total bad debt of the credit institution system accounted for 2.18% of total outstanding loans. From 15 August 2017 (when Resolution 42 came into force) to the end of March 2018, the whole system has processed bad debts of VND 100.5 trillion under Resolution 42.

According to the State Bank of Vietnam, commercial banks have basically completed the restructuring plan associated with dealing with bad debts to submit to the State Bank of Vietnam for approval. The plan focuses on improving asset quality, credit quality control and dealing with bad debts; strengthening financial capacity, expanding the scale, network, developing payment services, and other non-credit services.

Mr. Pham Thanh Ha, the Director of Monetary Policy Department, said that based on the target of credit growth in 2018 of 17%, the State Bank of Vietnam shall control the credit size in accordance with the orientation and flexibly adapt to the practical conditions. At the same time, improve the quality of credit, support credit institutions to effectively expand credit to production sectors and priority sectors, tightly control credit for potentially risky areas, create favourable conditions for businesses and people in accessing loans.

Specifically, Mr. Nguyen Quoc Hung, the Director of Credit Department of Economic sectors, said that credit increased right from the beginning of the year and increased steadily over the months, and reached over VND 6.7 million billion until 31 May 2018, an increase of 6.16% over the end of 2017, contributing to the first quarter's GDP growth of 7.38%, the highest increase in 10 years.

Notably, credit in the first months of 2018 has focused on the manufacturing and business sector, which is the driving force of economic growth. Specifically, by the end of May 2018, credit outstanding for agriculture, forestry and fishery was estimated to increase by 6.8%, outstanding loans in industry and construction increased by 6.83%, and outstanding loans for trade and services were estimated to increase by 5.7%.

In addition, credit continued to focus on priority areas, with high growth rates compared to end of 2017. For example, credit for agricultural and rural development increased by 5.8%, the credit for the export sector increased by 15.64%; credit for high technology enterprises increased by 6.29%; credit for development assistance industry increased by 5.42%; and credit for small and medium enterprises increased by 2.61%.

In the first 6 months of 2018, the State Bank's branches in provinces and cities coordinated with the local authorities to hold more than 300 meetings and dialogues between banks and enterprises. Throughout the program, banks disbursed more than VND 210,000 billion to more than 20,000 enterprises and some other subjects; implemented solutions to restructure repayment period, reduced interest rates for old loans to nearly 1,900 enterprises and nearly 600 customers, and solved difficulties for customers to borrow capital to stabilize production.

In particular, credit for risky areas is strictly controlled, within the control of the State Bank of Vietnam. Specifically, real estate lending increased by only 2.19%, lending to BOT projects increased by 2.15%, and credit in the securities sector decreased by 3.92%.

Mr. Hung pointed out that the source of credit was in the direction of the State Bank of Vietnam, focusing on the production, business sectors and priority areas, credit for some potentially risky areas under strict control, which ensures the safety of banking operations.

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Regarding the orientation and solutions in credit management from now until the end of the year, Mr. Hung said that the State Bank would continue to run credit policies in the direction of controlling credit size rationally, safely and effectively, creating favorable conditions for enterprises to access capital; to focus on credit for priority areas, the production sector under the direction of the Government, contributing to the objective of economic growth and control of inflation set by the National Assembly.