The central bank has said it will keep monetary policy flexible to ensure inflation does not exceed 4.5 per cent this year and monetary and foreign exchange markets remain steady.

The credit growth quota for the year is 14-15 per cent, the State Bank of Vietnam (SBV) said in a directive, adding that its aim is to ensure liquidity for all lenders.

It requires them to keep their bad debt ratio to below 3 per cent and ensure management and transparency in operations.

Banks should promote non-cash payments and digital transformation to improve the quality of their products and services and prevent money laundering, it said.

Under the directive, the Bank for Social Policies will further reduce interest rates to support businesses in priority sectors.

Cross-ownership in banks

The directive requires the banking sector to continue with the restructuring of weak credit institutions.

The SBV said it would also improve the legal framework for handling bad debts and preventing cross-ownership in banks, explaining it is vital to prevent cross-ownership and governance abuse by major shareholders to manipulate them.

Analysts have repeatedly warned that cross-ownership between real estate firms and banks could cause the latter to give the former priority in lending.

This could pose risks to the financial system and the entire economy, they have warned.

The SBV has since October last year placed the HCM City-based Saigon Commercial Bank under special control due to its multiple problems related to cross-ownership and abuses by major shareholders. — VNS