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Banks focus on collecting debts, restrict disbursementUnlike 2012, commercial banks now can easily mobilize capital from the public. However, the capital flow has got stuck, because banks cannot push up lending.

Collecting debts on the top priority

A report by the State Bank of Vietnam showed that in January 2013, the banking system’s credit growth rate was minus 1 percent in comparison with that in late 2012.

As such, 2013 was the second consecutive year which witnessed the minus credit growth in January.

In 2012, the outstanding loans by February 17 had decreased by 0.79 percent over the end of 2011. The situation lasted in the whole second quarter of 2012 with the total outstanding loans of the banking system down by 2.13 percent by March 20, 2012, in comparison with December 2011, according to the National Finance Supervision Council.

Meanwhile, the outstanding loans in the first quarter of the recent years were always positive. Especially, the credit growth rate in the first quarter of 2008 reached the record high of 12 percent.

A senior official of the HCM City Branch of the State Bank of Vietnam has attributed the current low lending to the low demand in the season. In general, the demand for loans is low on the first days of the year.

Meanwhile, bankers have admitted that it is very difficult to find capable borrowers now. General Director of Eximbank–Truong Van Phuoc, said Eximbank plans to have the credit growth rate of 20 percent this year, therefore, it has been moving heaven and earth to look for borrowers. However, the capital flow still got stuck because of no borrower.

A banker in HCM City frankly said that the top priority task for the bank now is to collect debts, while he still does not think of pushing up lending right now.

“Businesses now all try to boost sales to clear the inventories. They do not think of expanding production right now. Therefore, it is understandable that banks cannot find borrowers,” he said.

The director went on to say that banks themselves do not intend to push up lending, because they need to clear the bad debts first, before thinking of disbursing for new loans.

Clearing bad debts first, then pushing up economic growth

The international finance experts who attended the workshops on Vietnam’s economy in 2013 recently, all said that the biggest challenge for Vietnam in the year is the huge bad debt, while the top priority task for Vietnam is to clear the bad debts.

The emphasizing that settling bad debts and ensuring the safety of the banking system should be seen as an urgent task, based on which Vietnam would be able to restore the economic growth and rescue the real estate market.

The bad debts would make the credit flow get stuck, push small banks against the world. Especially, experts have warned that if the bad debts cannot be cleared, this may lead to the collapse of the real estate market, once commercial banks rush to bargain away the real estate products which are the collaterals for the loans.

The macro economy would get stabilized, while the real estate market would warm up again only when Vietnam has a healthy banking system, because the system pumps capital to the sectors to activate the markets.


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