State Bank requires strict control of credit risk

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The State Bank of Vietnam requested to reduce lending interest rates to meet the demand for credit capital in a timely manner. Photo: ST

Preferential interest rates

Since the decision to extend the credit growth limit (room) by 2%, the State Bank of Vietnam (SBV) has repeatedly emphasized the principle of increasing credit quotas in the direction of credit institutions with better liquidity, lower interest rates will lead to higher credit growth.

According to State Bank Deputy Governor Dao Minh Tu, the opening is aimed at creating more room for commercial banks to expand credit in necessary areas. But credit allocation is also encouraging for banks with abundant liquidity and the current policy of reducing interest rates.

Currently, many credit institutions have quickly implemented incentive programs to push capital into the economy. According to preliminary statistics, about 20 credit institutions have publicly announced credit programs and products with preferential interest rates.

For example, TPBank said that it has just implemented a credit package of VND 5,000 billion for businesses in five priority areas, export, green development, women-owned enterprises, and customers who use multiple services of the bank.

The preferential interest rate will be reduced by 1.5-2% compared to the normal interest rate. For businesses owned by women, an additional 0.2% discount compared to the above incentive rate.

Similarly, ACB Bank also prepared a credit line of VND 4,000 billion with a preferential interest rate of 1%/year to disburse loans to support businesses. Vietcombank reserved a credit package of up to VND 500,000 billion with a preferential interest rate of 1% reduction for customers. Agribank spends a loan balance of about VND1 quadrillion to reduce 20% on the interest rate customers are borrowing.

According to Mr. Nguyen Quoc Hung, Chairman of the Vietnam Banks Association (VNBA), in the last months of the year, the capital demand of enterprises increased while the money source was very limited because it was difficult to raise capital from the issuance of bonds. Many banks have committed to reducing interest rates; capital flows are oriented to focus on production and business sectors, especially priority areas such as agriculture - rural areas, exports, small and medium enterprises, and industry.

Focusing on granting credit to production and business areas

In particular, on December 22, the Governor of the State Bank of Vietnam signed and issued a document to credit institutions requesting to seriously implement a number of contents on credit and interest activities.

The document clearly states that following the direction of the Government and the Prime Minister must be based on the recent developments of the market and credit growth and interest rates of the credit institution system, the Governor of the State Bank requested Credit institutions based on the credit growth targets announced by the State Bank of Vietnam, credit institutions actively need to source capital to promptly meet the credit capital demand for the economy, and minimizing risks.

Credit institutions need to focus on providing credit to production and business fields, priority areas (agriculture, rural exports, small and medium-sized enterprises, supporting industries, high-tech enterprises); economic growth drivers under the direction of the Prime Minister (investment, consumption and export); industrial park construction; lending to meet people's housing needs; housing real estate projects that are about to be completed and handed over with the ability to repay loans in full and on time, ensure legality with good liquidity, especially social housing projects, housing for workers, and commercial housing projects with reasonable prices.

Credit institutions must strictly control risk for investment activities in corporate bonds, potentially risky fields such as investment, securities trading, and the real estate sector, especially credit extension for the purpose of real estate investment and business, which controls the concentration of credit on a number of large customers/customer groups, large-scale projects, and high-end segments.

The SBV requested to continue promoting the implementation of the interest rate support program according to the Government's Decree 31/2022/ND-CP dated May 20, 2022 on interest rate support from the state budget for loans of enterprises, cooperatives, business households and Circular 03/2022/TT-NHNN dated May 20, 2022 of the State Bank guiding commercial banks to implement interest rate support according to Decree 31/2022/ND-CP.

The Governor of the State Bank of Vietnam requested credit institutions to continue to reduce operating costs, administrative procedures and unnecessary expenses in order to have room to strive to reduce lending interest rates as prescribed in Resolution 43/2022/QH15 dated 11/01/2022 of the National Assembly on fiscal and monetary policies to support the Socio-economic Recovery and Development Program and the direction of the Government and the Prime Minister.

The SBV said that it will monitor cases where credit institutions continue to raise interest rates and take measures to deal with these credit institutions.