Banks allergic to credit quota mechanism

 In 2012, the maximum credit growth rate was decided by the State Bank which granted “quota” to every commercial bank. Will the quota scheme be applied in 2013?

 

Analysts have every reason to think that the quota scheme would not be applied by the central bank this year, saying that there’s no need to set up a limitation on the credit growth, once the worry about the minus credit growth rate has been raised.

A report by the State Bank of Vietnam showed that by February 6, 2013, the outstanding loans of the whole banking system had been minus 0.16 percent over the end of 2012. This has been described as a threat to the national economy, because the minus credit growth would have bad impacts on the national economy.

However, a banker in Hanoi said the low credit growth rate in the first months of the year is foreseeable. Businesses borrowed short term capital late last year to organize year-end production. Meanwhile, the first months of the year were the time for them to pay debts. This explains why the outstanding loans always increase very slowly in the first months of the years.

Deputy General Director of Maritime Bank--Tran Xuan Quang, also said that it’s still too early to make any conclusion just after seeing the minus credit growth rate in the first two months.

While some experts warned about the low credit growth rate in 2013 due to the production stagnation, President of OCB Trinh Van Tuan said he believes the situation would be better in the time to come, when the government’s measures show effects.

Tuan affirmed that it would not be too difficult to obtain the 12 percent credit growth rate for the whole banking system this year as targeted. Especially, he thinks that the growth rate could even be higher. 

The banker went on to say that in 2012, OCB still obtained the credit growth rate of 15 percent. Meanwhile, it is still awaiting the quotas from the State Bank for 2013.

Quota scheme not applauded by banks

In 2012, the State Bank decided the maximum credit growth rates for every commercial bank, depending on their capability, business scale and the credit quality.

However, a lot of banks reportedly did not use up the quotas granted to them. This was attributed to the low demand for capital from businesses, which decided not to step up production in the context of the low purchasing power.

Despite the great efforts by the State Bank to slash the lending interest rates to make it easier for businesses to access bank loans, the outstanding loan growth remains very slow.

Tuan of OCB believes that the interest rate reduction could not be the factor that helps push up lending. He said businesses would come to banks to ask for loans if only they can see that the market demand increases and they can sell products.

Quang has also affirmed that the bank is ready to provide loans at preferential interest rates to the clients with good profiles and feasible business projects. 

It’s highly possible that the above said quota scheme would also be applied in 2013, which means that the central bank would set limitations on every group of banks, after considering the banks’ business scale, credit quality, the liquidity management and the corporate governance.

Meanwhile, Le Quang Trung, Acting General Director of VIB thinks that the State Bank should not set quota for the groups of banks, but it should only set the caps on five priority sectors.

Tien Phong