Credit loosens, economy slowly recovers


On September 7, SBV approved the line of credit extension after being asked to do so to pave the way for economic recovery.

However, not all commercial banks have obtained an additional line of credit. The central bank said only 15 of the 30 banks that are in sound financial condition or have taken the lead in implementing government policies got an additional 0.7 to 4 percent from the old credit growth limits.

The 15 banks are now allowed to lend several trillion VND to 50 trillion dong in the last four months of the year.

Some bankers have said that this figure is nothing compared to the huge demand for capital, which is particularly high during the year-end business season, which means that they will not be generous in l granting of loans.

Although they have additional credit limits, they will only be able to disburse for loans that have been approved, and not all requests will be met.

During this time, the other banks, which have not obtained an additional line of credit, will not be able to grant more loans.

SBV has been consistent in its view that the credit margin should not exceed 14% for the entire year. As such it was released in drive and drabs.

Some companies told VietNamNet that they and the banks follow procedures to disburse the loans, but these are mainly short-term loans, which were approved a long time ago and have been postponed because the banks do not didn’t have enough credit at the time.

Meanwhile, businesses applying for new loans will still have to wait. At the same time, commercial banks must disburse the 2% interest rate subsidy program.

“We are not eligible for the 2% interest rate subsidy program and we borrow capital at commercial interest rates, but we dare not expect banks to give us loans. If we are lucky enough to get loans, they will be small due to low credit growth limits,” said Nguyen Hoang Son of Hung Ha Phat Company in Hanoi.

“The capital for the year-end production season is really worrying,” he said.

A bank manager said that loan applications were piling up because the demand for capital was very high: businesses need more working capital, while people need money to buy houses, therefore the credit limit will not suffice.

In principle, if banks can collect debts, they can lend money. However, as businesses face challenges and large inventories, debt collection is progressing slowly, affecting loan limits.

‘Engine without gasoline’

According to SBV, by the end of August, credit in the economy had increased by 9.91% compared to the end of 2021, a high growth rate compared to the same periods in previous years.

However, as of June 30, credit in the economy had increased by 9.35% compared to the end of 2021. Thus, credit has only increased by 0.56% in the last two months.

The Council for Private Economic Development Research (Council IV), part of the Prime Minister’s Advisory Council for Administrative Process Reform, reported that discussions with 16 organizations and associations in August revealed that most businesses are still facing financial difficulties. They lack working capital and have difficulty accessing bank loans.

Small and medium-sized enterprises (SMEs) and commercial households account for 95% of the total number of businesses. If credit is not provided, some may go bankrupt because they do not have enough money to pay workers, do business or make new investments.

The economy without capital is likened to an “engine without gasoline”.

Tighter money supply pushes interest rates higher and leads to lack of business capital, affecting economic recovery.

Analysts say the situation is becoming more stressful and the economy will suffer.

Some of them recently asked the State Bank to scrap the credit growth limit system, saying it had become obsolete and was causing big problems.

Due to lack of capital, production and business became stagnant. Meanwhile, the credit limit creates an unfair “demand and grant” system for commercial banks.

Many countries no longer use the line of credit to control the money supply, but use more flexible tools, such as reserve requirements and securities exchanges between central banks and credit institutions.

These are market-based tools, which are effective in preventing banks from opening the “credit valve” too much.

Analysts also pointed out that the current inflation rate is caused by the push cost, not monetary factors. So, to control inflation, you have to use fiscal policy rather than monetary policy.

Tran Thuy


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