Vietnam sets new credit growth limits for individual banks

By Viet Nam News | Source: ANN

The State Bank of Vietnam has assigned this year’s specific credit growth limits to local banks based on their economic health.

Banks, which are ranked in the top group based on size, credit quality, liquidity and corporate governance, are permitted to expanding their total credit by a maximum of 12 per cent this year, equal to the credit growth target set for the whole banking sector.

The lending growth cap for banks ranked in the second group is 10 per cent.

Some weak banks will not be allowed to increase loans this year.

Industry insiders said that it could cause difficulties for major banks because many had targeted credit growth much higher than the cap, so some may have to adjust their business performance plans this year.

For example, Military Bank, which posted the highest credit growth of 27 per cent last year, has targeted 17 per cent credit growth this year.

It may be even harder for Lien Viet Post Bank as its credit growth limit this year is also 12 per cent against its target of 30 per cent set earlier this year.

As credit growth in the first quarter only grew 0.03 per cent, experts said that the central bank should allow banks to expand their lending and only control their credit growth through indicators such as loan-to-deposit ratios, liquidity and provisions in a move to reduce non-performing loans.

Last year, the SBV classified local banks into four groups with different lending growth limits. Specifically, it set a maximum credit growth rate at 15 per cent for Group A (healthy banks), 15 per cent for Group B (moderately healthy banks), 8 per cent for Group C (unhealthy banks) and zero per cent for Group D (weak banks).

The credit growth limit regulation was considered unsuccessful last year as some banks, which were allowed high lending growth, failed to use it, while others that were limited to low lending growth asked for more room.

Leave a Reply

Your email address will not be published. Required fields are marked *