Economic Sector

Last updated: Thursday, April 18, 2019


PM Asks Banks to Expel Loan Sharks out of Society

Posted: Monday, January 21, 2019

Vietnamese Prime Minister Nguyen Xuan Phuc gave such guidance at the Conference on Implementation of Banking Tasks in 2019 on January 9, 2019.

Bad debt “blood clot” gets smaller

He said, given the complex evolution of the world economic situation in 2018 that has huge impacts on Vietnam’s management of monetary policies and banking system, “we united and completed economic, social, defense, security and diplomatic tasks in an excellent manner.” In particular, the macroeconomic foundation has been strengthened.

While many countries raised interest rates, especially our large trade partners, we kept inflation at 3.54%. Sovereign credit ratings got upgraded. “Many commercial banks, both State-run and privately-held, have shared with the economy and the business community,” the Prime Minister said. He hailed some commercial banks that have just announced further lowering interest rates.

“The Government spent a lot of time listening to the banking industry's opinions to deal with existing matters, particularly institutional and policy affairs,” he said. Prime Minister Phuc requested the SBV to continue regulating the monetary policy in a flexible, cautious and effective fashion, and harmoniously combine the monetary policy and other policies, in addition to persisting with the goal of ensuring macroeconomic stability, controlling inflation and accelerating growth. The central bank necessarily maintains the stability of the monetary market, creates a room for active regulation of fiscal policies and other macro policies.

In 2018, despite lower credit growth, GDP growth was higher. The Prime Minister acknowledged that credit quality and growth model have been changed for the better. In addition, the credit system has drastically dealt with bad debts.

At present, the bad debt ratio is about 1.89%, a considerable drop from 2.46% in 2016. Notably, the whole system handled about VND900 trillion (US$38.8 billion) of bad debts. “I asked some bankers and knew that bad debts had been cleared. Bad debts were formerly called a blood clot in the economy which has now got smaller and even melted away at some banks. This comes from macro factors and their administration,” said the Prime Minister.

However, he noted that Vietnamese banks performed better recently, but on the regional and international arena, the Vietnamese credit system is still weak in financial strength and asset quality. The list of their products and services is still poor. The organizational structure is still cumbersome and unreasonable. “Our management level is not high, and our banking technology still lags behind regional and global levels,” the Prime Minister said.

Resolutely repelling loan sharks

Black credit activity caused social disorder in some places and adversely affected official banking and monetary operations, and spoiled public confidence. “Shark loans are besieging vulnerable and disadvantaged people from urban to rural areas. Worse, the current gangster way to reclaim loans forced borrowers to lose their homes and pushed their families into poverty,” he quoted the saying by a National Assembly member.

Notably, a share of people have no access to credit, meaning that the banking sector has not brought credit services to all people, especially in rural, remote and isolated areas. Therefore, the banking sector needs to actively coordinate with the Ministry of Public Security to better deal with loan sharks and promptly facilitate people to have access to credit. The Prime Minister expressed his pleasure at the information that the State Bank of Vietnam (SBV) has a credit package of over VND5,000 billion (US$215.5 million) for the Vietnam Bank for Agriculture and Rural Development and the Vietnam Social Policy Bank to handle this issue.

Regarding the tasks set for 2019, the Prime Minister highly appreciated the SBV’s action plan to carry out Government Resolution 01 and Resolution 02, and reminded the central bank of risks from the world economy. “The SBV needs to be vigilant and watchful for current developments, and have flexible and tight solutions to regulating policies.”

Stressing Vietnam’s aspiration to rise up, from low-income to middle-income and high-income country, PM Phuc thought that the SBV and credit institutions must be responsible to national development. In 2019, they must outperform 2018 and achieve development breakthroughs. This requires active response from the banking industry.

He recommended further administering the monetary policy flexibly, cautiously and effectively, enhancing the response to restrict adverse external impacts, harmoniously combining with fiscal policy and other macro policies, and staying consistent to macroeconomic stability, inflation control and growth acceleration.

“This is a dual, heavy goal that requires visionary, scientific, intellectual and timely management,” the Prime Minister concluded.


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