Despite social distancing, credit in the two largest localities in the country, Hanoi and HCM City, still grew strongly in the first eight months, showing positive signs for credit growth.

Till the end of the year, credit will face many difficulties because of the pandemic.
Photo: Internet 

The State Bank of Vietnam (SBV) has not released the latest credit growth results. Per the statistics of the Hanoi Statistics Office, by the end of August, the total outstanding credit in Hanoi hit nearly VND2.4 million billion, up 1% compared to the previous month and up 8.3 % compared to the end of 2020.

As for the HCM City Statistics Office, the total credit balance of the whole banking system in the city as of August 1reached nearly VND2.7 million billion, up 0.2% from the previous month and up 13.1% from the same period in 2020.

According to the Hanoi Statistics Office, the increase is because credit institutions in the area have promoted support measures for customers facing difficulties due to the pandemic. Simultaneously, they have restructured the repayment term, exempted, and reduced loan interest, temporarily kept the debt group unchanged for loans in accordance with the SBV's regulations, and considered lending to customers to maintain their production and business activities.

So far, Hanoi’s credit institutions have restructured the repayment term for some 58,000 customers with outstanding loans of VND74,900 billion; exempted, reduced, or lowered interest rates for more than 178,000 customers with outstanding loans of VND254,200 billion; given new loans at preferential interest rates with accumulated sales from January 23, 2020 to now hitting VND965,500 billion for more than 97,700 customers.

Meanwhile, in HCM City, credit mainly has flowed to export processing zones, industrial parks, production and export bases of foreign-invested firms. Thanks to the positive growth in export orders, foreign businesses still maintained their operational efficiency and credit demand increased steadily.

However, according to the SBV branch in HCM City, outstanding loans in industrial parks - export processing zones are associated with the activities of foreign banks in Vietnam.

According to experts of VnDirect Securities Company, amid the pandemic, the SBV will operate its monetary policy more flexibly in the direction of supporting economic growth. One of the policies the SBV may apply for the second half of this year is to raise the credit growth ceiling for banks.

VNDirect believed with the current downtrend of lending interest rates, the regulator could raise the credit growth target for the year of the banking industry to 13%, higher than 2020.

However, according to experts, under the impact of the pandemic, credit turnover nationwide still slows down due to the suspension of production and business processes, production interruptions and slow consumption of goods. In addition, bad debt in the banking system tends to increase, so banks are more cautious and cannot lower their credit standards.

According to the survey results announced by the SBV, credit institutions forecasted the credit balance of the banking system would increase by 4.7% in the third quarter and increase by 13.1% in 2021, which has been reduced 14.7% from the previous survey's expectation.

The SBV developed three credit growth scenarios for 2021 at the beginning of this year. In scenario one, mass vaccination happens and the Covid-19 pandemic is controlled, credit will increase by 12-13%, possibly reaching 14%. In scenario two, the pandemic lasts until June, social distancing measures are still implemented, and the vaccination time is prolonged, credit may increase from 10-12%. In scenario three, the pandemic lasts until the end of the year, the growth rate will be about 7-8%.

The current situation is closest to scenario three, so banks and experts expected that the pandemic would be under control by early October. Then credit may accelerate with the peak season in the fourth quarter and reach the target for the whole year. Currently, lending interest rates have been adjusted down relatively sharply in the past month with a reduction ranging from 0.5- 3%.