Clients make transactions at VPBank's branch in HCM City. Despite banks' efforts to lower lending interest rates, credit growth in HCM City remained at a modest 1 per cent in February. — VNA/VNS Photo Tran Viet

HCM CITY (Biz Hub) — Despite banks' efforts to lower lending interest rates, credit growth in HCM City remained at a modest 1 per cent in February, according to the State Bank of Viet Nam.

Nguyen Hoang Minh, the director of the city branch of the central bank, said this continues a trend established in recent years with most firms remaining reluctant to borrow in the early part of the year.

Pham Huy Khang, general director of Sacombank, said in the first two months of the year the bank's credit growth increased by only 1 per cent year-on-year while deposits grew by 6 per cent.

He expected the situation to improve in the second quarter when businesses would have production and business plans and require funds.

Tran Ngoc Tam, deputy general director of NamA Bank, admitting that credit growth at his bank was also very low, said the interest rate is not the major issue for most companies since it is now stable and even lower than in 2006-07.

But they are reluctant to borrow from banks because they are still unsure about doing business in the difficult economic situation, he added.

Minh said banks are busy settling bad debts and afraid of new bad debts arising.

But Nguyen Van Binh, governor of the State Bank of Viet Nam, said the central bank branch in the city should instruct banks to soon find ways to step up lending if they want to achieve the year's credit growth target of 12-14 per cent.

"The banking sector needs to take the initiative in making supply meet demand," Binh said at a meeting with local banks late last month.

They should consider further lowering loan interest rates to enable more companies to borrow.

He suggested that the interest rate on short-term loans should be cut to 7-8 per cent and on medium-term loans, to 10 per cent.

The interest rate on loans to be provided to businesses participating in the city's price-stabilisation programme should be slashed to 5 per cent, he said.

Minh listed some of the efforts his office was making to help the banking sector achieve the yearly target.

Khang of Sacombank said his bank would continue to provide active support to customers — both corporate and individual — especially small and medium-sized enterprises, household businesses, and small traders. — VNS