Credit must be controlled by the market mechanism | Bank and finance

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Illustrative photo. (Photo: SGGP)
Stop disbursement due to lack of credit

According to the State Bank of Vietnam (SBV), credit capital has increased sharply and achieved the goal of supporting economic recovery after the pandemic, as it mainly focused on loans in the field of production. and business. Meanwhile, lending activity in other risky areas, such as real estate and BOT, is still tightly controlled. The banking sector is not completely closed to real estate credit because good projects are still being considered, and the real estate credit needs of individuals are still sustained.

In a context where the economy has absorbed capital heavily, many commercial banks no longer have a line of credit to lend, even when they prepare to lend under the interest rate support program of 2 % of the government. The loan balance of this package is expected to reach hundreds of billions of Vietnamese dong. According to the Real Estate Association of Ho Chi Minh City, after the SBV issued an official letter requesting credit checks in risky areas, including real estate, in the past two months, capital borrowing by individuals and businesses in this area is extremely difficult. Many real estate businesses have been hungry for capital because their loan applications have been turned down by banks, mostly because their line of credit has already run out.

In particular, the situation of many banks running out of line of credit has resulted in certain acts of oppression and causing difficulties for bank customers who still have a line of credit. Minh Hoang, living in Thu Duc City, HCMC, said he had completed the loan application to buy an apartment in Thu Duc City to be disbursed in early June 2022. However, ten days before the disbursement, the lender informed Hoang that his loan could not be disbursed because his line of credit was exhausted. This announcement made him stumble because he had fulfilled the contract for the purchase of the apartment. He rushed to other commercial banks to apply for a loan, but he also received the reply that they had to wait for the SBV to extend a new line of credit to lend. Having no other choice, he had to accept a detour.

“Finally, I had to agree to take out a life insurance policy worth 80 million VND for the loan of almost 1 billion VND to be disbursed so that I could make the payment for the apartment on time,” Hoang said.

Not only individuals but also businesses face difficulties when many banks run out of line of credit. A company who wishes to remain anonymous said that to obtain loans at present, even if they are loans for commercial or production activities, companies must buy insurance contracts from partners of bank insurance, depending on the amount of the loan.

Many banks are even in trouble when they run out of line of credit, and they have offered to SBV to apply for an extension of the line of credit. MB Bank is an example. This lender said that demand for credit from MB’s retail and business customers is extremely high, especially when it launches the 2% interest rate support program.

Similarly, ABBank said it has reviewed the credit plan and recorded a limit of VND572 billion to participate in the interest rate support program, which equates to a size of VND28.6 trillion of the average balance of loans within two years for subjects benefiting from an interest rate. Support. However, ABBank’s credit balance in May 2022 is VND 84.010 billion, up 6.8% from the end of the year, and there is almost no line of credit left. Meanwhile, recipients of the 2% interest rate incentive program are expected to represent about 15% of ABBank’s total outstanding loans, so this bank needs credit to be able to to support businesses.

By safety factor

The credit limit is one of the hot topics raised at the 15th National Assembly. Many MPs have said that the granting of the credit chamber resembles the management of subsidies and is no longer appropriate in the current context. In addition, the application of the credit line mechanism when implementing the 2% interest rate support program will easily lead to the risk that banks have money but cannot provide loans. . In the meantime, lending to restart production after the pandemic following NA Resolution No. 43/2022 is extremely urgent.

Credit must be controlled by the market mechanism ảnh 2 Illustrative photo. (Photo: SGGP)

SBV Governor Nguyen Thi Hong once explained that the peculiarity of the Vietnamese economy is that investment capital is highly dependent on bank credit. Currently, the credit capital to GDP ratio is 124%, so Vietnam is one of the countries with the highest ratio in the world. Therefore, when there are fluctuations in the global economy, companies and people have difficulties in production and business activities, the banking system will be immediately affected. It is necessary to control credit growth because if banks run into problems or are unable to pay, this will have a ripple effect on the whole economy.

Previously, when the line of credit was not controlled, some banks had very high credit growth, up to 30-53.8%, creating a race for interest rates to mobilize sources of capital. Since 2011, when the bank applied measures to manage the credit line, money market management has been more positive and credit has stabilized again.

As for the fear that this credit limit will block the flow of cheap capital to borrowers, the SBV governor said that every bank wants to increase credit growth. However, if all the desired commercial banking limits are met, Vietnam’s macro-economy will not be as stable as it is now.

However, many experts still believe that instead of controlling credit through administrative measures as currently, the SBV can be flexible and apply more market-based tools because currently a few countries still use credit-granting tools like Vietnam.

By Nhung Nguyen – Translated by Thanh Nha

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