At a press conference for banking activities in the first six months of 2020 held on June 16 in HCM City, the State Bank of Vietnam (SBV) said that the credit growth of the banking industry had increased by 2.13 percent compared to the beginning of the year.
In credit management, closely following the development of the Covid-19 pandemic, SBV controlled the credit scale in line with the orientation targets, ensuring credit quality, creating favourable conditions for businesses and individuals to access to funding sources and quickly recover production and business.
However, according to SBV, under the impact of the Covid-19, due to low credit demand, as of May 29, 2020, the credit increased by 1.96 percent compared to the end of 2019.
As of June 16, credit growth of banking industry was up 2.13 percent compared to the beginning of the year. But compared to the six-month average of 2019, it was only a half due to the impact of the Covid-19. In the first six months of 2019, the banking sector’s credit increased by 5.7%.
As of May 29, 2020, total M2 payment facilities increased by 3.4 percent compared to the end of 2019; liquidity of the credit institution (CI) system was smoothly.
Regarding credit structure, Nguyen Quoc Hung, director of Credit Department of Economic Industries (SBV), said that rural credit grew by 0.3 percent compared to the beginning of this year; export credit rose by 4.94 percent (in the first 6 months of 2019, export credit increased by over 10%); credit in technology sector increased by 2.92 percent compared to the beginning of the year; ancillary industry 2.27%; SMS decreased by 0.7 percent and consumer credit also decreased.
At the Vietnam Bank for Social Policies (VBSP), credit also increased to support the poor people. According to Hung, when the Covid-19 pandemic happened, the banking industry was soon in the process of supporting the affected customers.
Specifically, in the first month, about 300 trillion dong was affected by the pandemic, increased to 900 trillion dong in the following month, then up to 1-2 quadrillion dong, largely affecting the banking industry.
Nguyen Thi Hong, SBV deputy Governor, said that the banking industry was soon involved when issuing Circular 01/2020/ TT-NHNN to restructure and extend debts to customers; discount for customers. The diseases had great impact on production and business activities of banks.
Therefore, credit demand of customers is unlikely to increase in the context of an unknown disease when it will be controlled. There are businesses that have to stop operating due to the disease.
“In the context that the Covid-19 pandemic has not ended, the production and business activities of businesses are affected, the capital demand of customers hardly increases. However, this is consistent with the current situation of the economy”, Hong said.
If the business meets the credit conditions, banks are willing to lend. Currently, banks’ liquidity is quite abundant. However, it does not mean that banks will lower lending standards to boost credit growth.
To support customers affected by the disease, the banking industry has also made efforts in promoting and approaching businesses to share difficulties. By this time, banks have been impacted on profits and cost cuts.
SBV has flexibly and synchronously implemented monetary policy instruments to stabilise the monetary and foreign exchange markets, control inflation, ensure liquidity for the economy, and support growth.
In managing interest rates, from the beginning of 2020 to now, SBV has adjusted down the interest rates twice, with a total reduction of 1.0-1.5 percent per year to support liquidity for credit institutions, creating conditions for CIs to access low-cost capital from SBV; decreased by 0.6-0.75 percent per year on the ceiling interest rate for terms of less than six months and one percent per year for the short-term lending interest rate cap for priority fields, currently at 5.0 percent per year, to support reducing borrowing costs of businesses and individuals.
Accordingly, the market interest rate level tends to decrease compared to the beginning of the year. Regarding the management of exchange rates, although the international market has complicated changes, the exchange rate and foreign exchange market is stable, the liquidity is smooth, credit institutions are net buyers from customers, the legitimate foreign currency demands of the economy is fully and promptly met.
At the same time, SBV promptly issued Circular 05/2020/ TT-NHNN dated May 7, 2020 to concretise Resolution No. 42/ NQ-CP and Decision 15/2020/ QD-TTg of the prime minister in guiding refinancing loans, zero interest rate. The package of 16 trillion dong for VBSP to provide loans to employers facing financial difficulties with zero interest rate has stopped working due to the impact of the pandemic.
In particular, according to Hong, in managing credit, closely following the development of the Covid-19, SBV controlled the credit scale in line with the orientation targets, ensuring credit quality, creating favourable conditions for businesses and people having access to funding sources and to quickly recover production and business.
New loans for production and business activities are actively deployed by credit institutions on the basis of assessment and sharing with customers, in accordance with provisions of applicable laws, financial capacity and capital balance of credit institutions; creating favourable conditions for customers to borrow but do not ease or lower credit conditions to ensure credit quality, maintain the health and safety of banking activities in the coming years.
According to SBV’s leaders, the banks’ capital and liquidity are in surplus, but that is not the reason for lowering lending standards. Therefore, at least customers must ensure system safety while banks actively deploy credit in priority areas.
Nguyen Quoc Hung said that following the direction of the government and SBV, the CI system has actively implemented credit programmes to support people and businesses affected by the Covid-19 with lending interest rates plummeting from 0.5 2.5%. Commercial banks even reduce lending rates by 3-4 percent per year.
According to Hung, after more than two months of drastic implementation, all credit institutions, including financial companies and foreign banks, were strongly involved.
Accordingly, on June 8, 2020, credit institutions restructured the repayment period for 249,108 customers with a total of 172.365 trillion dong, exempted, reduced and lowered interest rates for 403,177 customers with 1.227 quadrillion dong outstanding loans, new loans with preferential interest rates with cumulative sales from January 23 to now reached 978.529 trillion dong for 225,514 customers with lower interest rates commonly from 0.5 to 2.5%.
Particularly, VBSP has extended the debt of 3.856 trillion dong to 152,796 customers, adjusted the debt repayment term to 1.567 trillion dong for 75,209 customers, lent new loans to 826,473 customers with outstanding loans of 31.149 trillion dong.
At the same time, SBV has directed CIs to simplify loan procedures, administrative reforms, and promote solutions to enhance access to capital for individuals and businesses.
Recently, SBV continued to lead the ministries and branches in the Public Administration Reform (PAR) index of SBV in 2019, reaching the highest point of 95.4/100 points. This is also the 5th consecutive time that SBV ranked No. 1 on administrative reform in ministries and ministerial-level agencies.
The overall objective of the State’s administrative reform is to promote administrative reform in SBV system in association with reforming the banking service method and to create great changes on improving the business environment in banking activities.
