Comprehensive Solutions Needed to Enhance Credit Absorption Capacity

As of September 17, 2024, credit growth across the financial system has shown improvement, reaching 7.38% compared to the end of 2023, up from 5.73% during the same period last year. The private commercial joint stock bank sector recorded an increase of 8.6%, capturing 45% of the market, marking the highest growth in the system.

Many banks are boosting capital mobilization strategies to meet the anticipated rise in credit demand in Q4 2024

While credit growth has improved, it remains below the 2024 target. Deputy Governor of the State Bank of Vietnam (SBV) Pham Quang Dung, said that credit growth across all sectors has shown positive trends aligned with economic restructuring goals. The private commercial joint stock banks have maintained a credit structure consistent with broader market trends, with credit for the trade and service sector rising significantly and accounting for approximately 50% of outstanding loans in that sector. Credit continues to be directed toward production, business activities, and priority sectors, with consumer credit showing signs of recovery. Outstanding loans for living needs and credit extended through credit cards increased by 4.93%, though this is a slight decline of 0.2% compared to the same period last year.

Pressure on bank credit continues to rise as other capital mobilization channels in the economy face significant challenges and have yet to prove effective. The real estate market remains unstable, impacting many related industries and consumer demand for housing. Additionally, the global economy is experiencing slow growth, with a complicated international market and persistently high interest rates, which in turn affect domestic interest rates and exchange rates, said Dung.

He said that both bad debt and potential bad debt are on the rise, with risks increasing as the policy of restructuring debt repayment terms and maintaining debt classifications continues. The credit absorption capacity of businesses and individuals is low, with many companies reducing or halting production due to a lack of orders, leading to dissolutions, closures and weakened financial health. A trend of tightening and cutting spending among consumers has resulted in low credit demand.

Moreover, natural disasters and floods have caused significant damage, impacting the lives and businesses of customers and creating further challenges for commercial banks in their operations.

Experts said that in the last months of the year, businesses will require capital to enhance production and operations, leading to an anticipated increase in capital demand across the economy. In response, many banks are implementing capital mobilization strategies to bolster their financial capacity and meet the projected surge in credit demand for the fourth quarter of 2024. Currently, banks have a lot of room for credit growth, with the private banking sector utilizing less than 70% of their assigned targets.

Since early September 2024, several banks, including OCB, ACB, Dong A Bank, OceanBank, Agribank, Bac A Bank, VietBank, GPBank, NCB, BVBank, and PGBank, have raised their deposit interest rates. Short-term deposits (1-2 months) now offer interest rates around 3.4% to 3.5% per year, up about 0.2% per year. For 3-month deposits, rates have risen by 0.1% to between 3.8% and 4% per year; 4-month deposits offer 4.05% per year, and 5-month deposits offer 4.1% per year. Many banks have set long-term deposit rates exceeding 6% per year for terms of 18-36 months. Commercial banks are reducing costs and implementing policies to lower lending interest rates, thereby facilitating greater access to bank credit for individuals and businesses.

To enhance the economy's capital absorption capacity and foster business development, Deputy Governor Pham Quang Dung said that the State Bank will continue to implement monetary policy in a proactive, flexible and timely manner. This will involve effective coordination with fiscal policy and other macroeconomic strategies to promote economic growth, stabilize the macroeconomy and control inflation. The SBV will adopt proactive and flexible credit management solutions aligned with macroeconomic trends and inflation, facilitating access to credit for businesses and individuals. Efforts will focus on strengthening credit quality, ensuring safe and healthy credit growth, maintaining stable deposit interest rates, and striving to reduce lending rates. The aim is to enhance credit availability for production, business needs and consumer demands.

The SBV will resolutely implement social housing credit programs and initiatives for the forestry and fishery sectors. It will continue to restructure debt repayment terms and maintain debt classifications according to regulations, while also addressing the impacts of natural disasters by supporting affected individuals and businesses in accessing bank credit to restore their operations.

To promote the recovery of aggregate demand and enhance credit absorption capacity, Deputy Governor Dung emphasized the need for comprehensive policies from ministries, branches and localities, in addition to solutions from the banking sector. Specifically, efforts should focus on improving the investment and business environment and encouraging consumer spending. It is necessary to refine the legal framework to provide clear and synchronized guidance on the implementation of newly amended laws. Traditional growth drivers such as investment, consumption and exports should be prioritized. Accelerating the disbursement of public investment capital, increasing the attraction of social investment and high-quality foreign direct investment (FDI), and promoting trade activities are important. Continued efforts to stimulate domestic consumption will play a vital role in driving economic recovery.

In particular, it is important to continue effectively implementing policies for the exemption, reduction and extension of payment deadlines for taxes, fees, charges and land use fees. Efforts should be made to accelerate the resolution of challenges and promote sustainable development in the stock market, corporate bonds and real estate sectors. Maintaining stable and appropriate prices for goods regulated by the State is important to avoid impacts that could exacerbate domestic inflation and affect the production and business activities of individuals and enterprises. It is also important to enhance the capacity of enterprises to absorb capital, along with providing support mechanisms such as the SME Guarantee Fund and the SME Development Fund to facilitate access to capital for small and medium-sized enterprises.

By Quynh Chi, Vietnam Business Forum