Foreign credit up 40 percent over the previous year.
The State Bank of Vietnam reported a 22.21percent credit growth rate as of 10 June. The figure is estimated to leap 40pct against last year due to lower foreign loan borrowing costs in comparison with that of dong which has incited people to borrow in foreign currencies and resell dong deposits.
Presently, the US dollar lending rate is averaging at 6-7.5pct per year on for short-term loans and 7.5-8pct per year for mid-term and long-term ones. Lending to agricultural and rural sector, exporting activities, meanwhile, are charged at the rate of 16.5-20pct per year and other fields at 18-22pct per year.
Risk of foreign lending and mobilisation imbalance
Overheated foreign loans growth has currently raised concerns over the imbalance between foreign credit granting and mobilisation.
Capital mobilised has experienced a sharp decline in the recent two months. The May volume slashed 6pct over April and June saw the capital attracted shrinking 6pct against the preceding month. As a consequence, many lenders have broken the US dollar mobilisation rate cap triggering a rate race among commercial banks.
Under the Circular 07/2011/TT_NHNN effective since 9 May 2011, credit institutions are only allowed to grant foreign credit to clients with legitimate potential source of foreign currencies for repayment. Such revenue may be earned from manufacturing activities, purchases from credit institutions and exporting earnings.
According to many economic experts, it is the tendency of the above-mentioned imbalance that poses hidden risks for banks’ liquidity placing burdens on the end of the year foreign exchange rate.
Recently, the Vietnam Banking Association (VNBA) has come out with a proposal revising Circular 07/2011/TT-NHNN on dollar lending towards narrowing the dollar borrowers. Accordingly, dollar loans should be given to dollar-earning businesses and enterprises that do not have incomes in foreign currency when needed will have to turn to dollar buying-selling transaction method.
General director of a large commercial joint stock bank viewed the measure as not only restricting foreign credit but also better monitoring exports and excessive imports via banking system.