On December 8, 2022, in an interview with the press, First Deputy Governor Dao Minh Tu of the State Bank of Vietnam (SBV) shared that the SBV's recent decision to increase the credit growth targets by 1.5-2% would help the credit institutions (CIs) to have more resources to extend more credit to the businesses, customers and economic sectors in need.
First Deputy Governor Dao Minh Tu
Below is the full text of the interview.
Question (Q): Could you please tell the reasons why the SBV has chosen December 5, 2022 to increase the credit growth targets?
Answer (A): On December 5, 2022, the SBV decided to increase the credit growth targets by 1.5-2% for the entire system of CIs in order to extend more credit to the businesses, customers and economic sectors in need.
In the third quarter of 2022, the macro indicators in general showed that it was not a favorable time to increase the credit room. Moreover, the liquidity of several commercial banks at that time was not enough to guarantee the credit growth. Besides, the SBV also found that all policies related to the exchange rate and the interest rates were still relevant. Therefore, the third quarter was not a favorable time for the credit growth adjustment.
Now, with only three more weeks until the end of 2022, but the SBV has identified that the impacts of the world situation on Vietnam have become less adverse. Especially, over the past months, with the strong and proactive leadership and guidance of the National Assembly, the Government and the Prime Minister, several macro indicators have shown positive signs. Therefore, the SBV has considered and decided to expand the credit room for the commercial banks in order to create more space to support the businesses, the projects and programs, and the economic sectors in need.
Q: Why are some banks allowed to expand the credit room by 1.5% or 2%, while other banks are not allowed to increase the credit room?
A: There are many expectations and objectives for this increase of the credit room. First of all, it is aimed to create favorable conditions for the commercial banks to extend more credit to the essential sectors. Apart from that, the credit room expansion is also to encourage those commercial banks with abundant liquidity and effective implementation of the current policy of interest rate reduction.
Some banks may not have run out of their credit room because the credit growth target of 14% for 2022 had been decided for the entire system; some banks still have abundant credit room, so it is not necessary to increase the credit room for those banks. Besides, some banks have already raised the interest rates to high levels, so the SBV has found it necessary to limit their credit growth.
Therefore, this credit room expansion can be considered as one of the policies to encourage commercial banks to focus on mobilizing capital and reducing the lending interest rates, creating favorable conditions for the businesses, essential projects and programs in the economy.
Q: Can you please tell how much money will be put into the economy with an increase of 1.5% - 2% in the credit growth targets?
A: The above increase is equivalent to VND 240 trillion to be added to the economy. Up to now, the credit growth rate is 12.2%. According to the credit growth target of 14%, there is still 1.8% remaining, plus 1-5-2% of this further increase, so there is up to 3.8% of credit room for the year-end period, including the Lunar New Year time. It can be said that there is quite abundant space for the commercial banks to provide capital to the businesses and the economy. However, all commercial banks must still proactively mobilize the capital in the society to create more lending resources.
The SBV will continue to monitor the cash flows using this credit room and stands ready to provide long-term capital resources for the commercial banks to have a stable source of capital to meet the essential needs.
Q: Could you please tell our readers the SBV is going to control this extension of the credit room so that the money is put into the right fields and the subjects in need?
A: The target subjects which the SBV wants to focus on, and are also the subjects as directed by the Government and the Prime Minister, are agriculture and rural areas, SMEs, enterprises engaged in exports, spare parts manufacturers, especially those involved in the sectors as the driving forces for the economic growth. Therefore, the SBV has requested the commercial banks to direct their capital flows into these sectors.
In addition, the Prime Minister has also directed to pay attention to the real estate sector, especially the social housing projects. The SBV has always considered this as a priority and has directed the commercial banks to prioritize credit for social housing projects, as well as to support those people in real need of housing. Therefore, the management of the cash flows, the monitoring of the activities of the commercial banks is extremely necessary.
The SBV has granted the credit room and given priority to those commercial banks with high liquidity and low lending interest rates. This is one of the policies to encourage the commercial banks to reduce their lending interest rates.
Q: Recently a number of banks have significantly reduced their lending interest rates. What does the SBV do in its direction to make this reduction spread more widely over the entire system?
A: The SBV has assigned Vietnam Banks’ Association to reach out to the commercial banks and encourage them to reduce their lending interest rates, depending on the financial capacity of each credit institution as well as the macroeconomic conditions, ensuring the liquidity, safe and sound banking operations of each CI, and the prudent banking, while still supporting the businesses.
All of the current policies and mechanisms issued by the SBV have come from the ultimate goals of supporting the economic growth in a sustainable way, controlling the inflation and maintaining the macro-economic stability.
Le Hang