Credit growth unlikely to increase

This year, the State Bank of Viet Nam plans to offer lower interest rates to boost the country's credit growth in several priority industries including production and export. The rate is expected to fluctuate around 11-13 per cent a year.

However, chairman of Vietcombank's Board of Directors Nguyen Hoa Binh told Dau Tu newspaper that the move would anot increase lending, as firms still hesitated to use bank loans to enlarge their business and production in the context of high inventory and low consumption.

Binh estimated that Vietcombank's credit growth this year would inch up by only 1 per cent against last year.

Deputy general director of HD Bank Pham Thien Long agreed, saying that this year's credit growth would not change significantly despite the decreased interest rates.

As consumption had not significantly risen, firms would continue to restrict the use of credit loans, Binh said.

Banks have also offered low lending rates to attract solvent borrowers, but their credit growth still remains low. At Eximbank, for example, the lending interest rate was cut to 8-9 per cent per year for solvent borrowers in production and export industries, but the bank is still finding it difficult to attract customers.

Moreover, despite the low credit growth, banks remain reluctant to lend customers with bad debts.

The director of a bank, who preferred to remain anonymous, said that his bank's credit growth plan this year was cautious and focused on dealing with rising bad debts.

SBV has affirmed that it will not set ceiling lending interest rates for all borrowers but plans to implement a ceiling rate of 12 per cent for several priority industries.

Lending interest rates will only decrease further if the country can keep inflation low.