Banks run out of credit quotas

Monday, Aug 24, 2015 08:00

Traders at the Bank for Investment and Development of Viet Nam (BIDV). Many large commercial banks have had no room for credit growth in recent months, as they have used nearly all the quota allowed by the central bank. – Photo

HA NOI (Biz Hub) — Many large-sized commercial banks have no scope for credit growth in the last months of the year, as they have used nearly all the quota allowed by the central bank.

Banks such as BIDV, SHB, Nam A Bank and MB, as well as ACB and Sacombank said they had only one to three per cent of credit growth left for this year.

Some other banks used up their quota for the entire year in the first half of the year itself.

SHB said its credit growth quota in H2 would be only 1.1 per cent as its lending in H1 rose to 13.9 per cent out of the 15 per cent allotted annual quota.

It is difficult for SHB to retrieve its outstanding loans as up to 56 per cent of them are medium and long-term loans. Short-term loans have been disbursed by the end of June.

Therefore, the profits of the bank, whose credit growth quota last year was 36 per cent, will be affected negatively to a significant extent.

BIDV, whose medium and long-term loans account for more than half of its outstanding loans, will also have to ask the central bank for increase in its credit quota, as it has used up this year's quota. Its lending in H1 rose 16.2 per cent against December last year to touch VND518.25 trillion (US$23.11 billion).

With only three per cent of the credit growth left for the last few months of the year, MB and ACB will also have to ask the central bank for more credit quota.

If the banks fail to ask for more quota, their profits in the second half of the year will be reduced significantly. According to the financial reports of banks in H1, credit is the main contributor to their profits.

Besides, slow rise in lending can cause non-performing loans to increase.

Experts are concerned that a slow credit growth of large banks in the last few months of the year could impact businesses negatively, as their capital demand often rises sharply in this period.

The experts said an expansion of the credit quota was not so difficult for the central bank, but commercial banks must ensure their liquidity and targets to prioritise borrowers correctly.

However, after the devaluation of the dong recently, experts said the central bank could tighten idle capital sources in the market in a move to prevent a speculation in American dollars.

The central bank, therefore, might have to scrutinise the credit growth quota of each bank, they said.

The central bank has applied a credit growth quota for each commercial bank in the past few years in a move to avoid the overheated growth of 2009, when a lending spree caused serious consequences, not only to the banking system but also the entire economy. — VNS

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