Striving for 12 percent credit growth rate – what for? While the State Bank repeatedly urges commercial banks to push up lending, economists believe there’s no need to strive for the 12 percent credit growth rate in 2013, if this brings risks. SBV gets impatient   By October 31, 2013, the total outstanding loans had increased by 7.18 percent over the end of 2012. The growth rate is much higher than the 3.54 percent in the same period of 2012, but far behind the 12 percent target this year. The State Bank of Vietnam (SBV) has got so impatient that it has gathered a meeting with 14 big credit institutions to discuss the measures to push up lending. However, at the meeting, the representatives from the most powerful banks stated that they have tried every possible means to increase the outstanding loans, and that they cannot do anything more. In fact, the central bank has taken a series of actions since mid 2013 already in an effort to pump more capital into the national economy. It has suspended the effectiveness of the Circular 02, supported the debt restructuring process to pave the way for indebted businesses to access new bank loans. The watchdog agency has many times reduced the ceiling deposit interest rates to pave the way for the lending interest rate reductions, thus making it easier for businesses to access low-cost capital. The moves have made the lending interest rates decrease to 9-12 percent, the 5-year deepest low. The State Bank has granted more “quotas” to some commercial banks to have the credit growth rates higher than 12 percent. Nam A Bank, for example, has got the permission to get the 30 percent credit growth rate this year, SHB to 20 percent, Sacombank and VIB to 20 percent. Commercial banks have affirmed they have lowered the lending interest rates, offered preferences to borrowers, launched special preferential lending programs, pushed up consumer lending and tried every possible means in order to increase the outstanding loans. However, the 12 percent credit growth rate target proves to be unattainable. Most banks reported the low credit growth rates for the first nine months of the year. Navibank reported the minus growth rate of 8.9 percent, Ocean Bank minus 5.2 percent, and Phuong Nam minus 0.2 percent. Why 12 percent? Analysts say in order to obtain the growth rate of 12 percent this year, about VND68 trillion needs to be “pumped” into the market. However, this proves to be an impossible mission. Dr. Cao Sy Kiem, former Governor of the State Bank, Chair of the Vietnam Small and Medium Enterprises’ Association, said Vietnam may fail to get the 12 percent growth rate target, but he thinks it’s more important to ensure the credit quality rather than the credit growth rate. An analyst said the 12 percent credit growth rate should be seen as the goal for banks to strive for, but not the goal for them to reach to at any costs. Truong Van Phuoc, Deputy Chair of the National Finance Supervision Council has recently posed a question that if the State Bank bears any pressure when deciding that banks have to obtain the 12 percent credit growth rate. “I believe that the State Bank does not need to obtain the 12 percent growth rate this year at any cost. It would be okay if the figures are just 9 or 10 percent. The credit quality, not the credit growth rate, is more important,” he said. Phuoc Ha, VietNamNet Bridge