Loosening credit room: caution necessary

	Demand for loans increases, banks increase "quality" for credit "room"
	Should the method of controlling credit room of banks be changed?
	SBV allows banks to expand credit room

Credit growth in 2022 is about 14% but with adjustments to match developments and the actual situation. Photo: Internet.

Many banks are almost running out of room

According to data from the State Bank of Vietnam (SBV), as of May 27, credit is estimated to increase by 7.75%, about two times higher than the same period in 2021. Therefore, many commercial banks have now reached the limit of the credit room granted by the State Bank at the beginning of the year and are applying for additional room.

The first to be mentioned is the group of big commercial banks with state capital. In the first quarter of 2021, VietinBank did not grow much credit; Vietcombank's increase was only 3.8%; and BIDV was 1.6%. However, according to the financial statements of these three banks in the first quarter of 2022, credit growth was very high, at 8.7%, 7.1% and 4.7%, respectively. Mr. Nguyen Viet Cuong, Deputy General Director of Vietcombank, said that in the first five months of 2022, credit at Vietcombank has grown at a high rate of over 9%.

In the group of joint stock commercial banks, credit growth is also close to the ceiling. For example, after the first four months of 2022, ACB and MB had credit growth of 8% and 14.3%, while the granted limit was 10% and 15%, respectively.

According to experts and bank representatives, credit skyrocketed due to the great demand for loans of businesses after two years of the Covid-19 pandemic. Therefore, the credit room granted by the State Bank at the beginning of the year will not be able to meet demand, if not extended, banks will not be able to push new sources of credit to the market, contributing to supporting the recovery of the banking sector.

In this regard, Mr. Tran Phuong, Deputy General Director of BIDV, said that the bank has reviewed and currently has more than 10,000 existing customers with about 200,000 loans that fully meet the conditions to enjoy the interest rate support package of 2% according to the policy of the Government and the State Bank.

However, with the current credit room in 2022 of 10%, in the last seven months of the year, especially when implementing the interest rate support policy, BIDV’s credit demand will increase. Therefore, he suggested that the State Bank soon consider opening the credit room for BIDV and other credit institutions to implement the program smoothly.

Which banks will be allowed to loosen the room?

Although loosening the credit room is a desire of banks, there are many concerns that overheated credit growth will make it difficult to control inflation.

As estimated by economic expert Assoc. Dr. Dinh Trong Thinh, opening credit room is not easy for all banks in the current context, because it is necessary to balance the inflation level to set a reasonable growth threshold. In addition, the State Bank has also had a policy of controlling the quality of loans to ensure the right purposes and the right subjects.

Especially, Ms. Ha Thu Giang, Deputy Director in charge of Credit Department for Economic Sectors (SBV), said that the principle of the State Bank is that banks that do not use up the credit room will be transferred to other banks. According to the financial statements of banks in the first quarter of 2022, while many banks reached high credit growth, others gained a low level, even a decline over the same period such as NCB, KienlongBank and PG Bank.

Moreover, many believe that some banks will be given priority or advantage to be considered by the State Bank to loosen the room. For example, experts from SSI Securities Company said that Vietcombank and MB may benefit most because these two banks plan to participate in the restructuring of "zero dong" banks. According to experts of Bao Viet Securities Company, MB is likely to be granted a high credit room up to about 30-35%.

But SSI experts also believe that the credit room in 2022 ranges from 7-15%, which is already higher than the 2021 limit at most banks. Therefore, credit growth in 2022 for banks will remain high. Many banks have set a credit growth target for the whole year of 2022 at a very positive level. For example, VIB set a credit growth target of 30% and noted that it depends on the room granted by the State Bank; MB aims to increase 16%; Vietcombank is 12%; ACB is 10%; and Viet Capital Bank is 15%.

In dealing with such problems, a representative of the State Bank of Vietnam said that the agency will calculate how to inject more capital into the economy through the credit channel in a reasonable manner, facilitating banks to deploy the 2% interest rate support package which still must be consistent with the goal of controlling inflation, in line with interest rate policy and other macro relationships. From the beginning of the year, the State Bank has also determined that credit growth in 2022 is about 14%, but it has been adjusted to match developments and the actual situation.