If the credit limit is extended, will cash flow into production and business?

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Credit growth in the second quarter is forecasted to be positive. Source: Internet

Will credit limit increase?

As of the end of May, credit growth reached 4.67%. According to the financial statements of the first quarter of the banks, credit growth is diverging quite strongly.

Specifically, MSB's credit growth in the first quarter of 2021 was 12.58% - the only bank with a double-digit growth rate during the period. Other banks such as MB increased by 8.62%, Techcombank increased by 6.76%, Nam A Bank increased by 5.04%.

However, there are still some banks that recorded slow credit growth, just over 1% or negative. Ms. Nguyen Thi Phuong, Deputy General Director of Agribank, said that in the first four months of this year, Agribank's credit grew by 1%, but still positive compared to the decrease in the same period in 2020.

Viet Rong Securities Company (VDSC) forecasts that the private banking sector will maintain credit growth in the second quarter. Despite being affected by the pandemic, VDSC believes that the credit balance of these banks will maintained at the assigned ceiling.

Therefore, in an exchange with the press recently, a representative of the State Bank said that this agency is reviewing and evaluating and on that basis, it will grant more credit quotas to banks that are about to "run out" of room.

In recent years, the SBV often sets an annual credit growth limit depending on the business performance of the banks and the bad debt ratio. However, the SBV always sets the initial credit growth limit at a low level, so a new grant is needed to extend it further for banks that have hit the ceiling.

At the beginning of the year, the SBV assigned credit targets to banks in the system.

State-owned banks, including Agribank, BIDV, and VietinBank, are assigned the target at 6.5-7.5%, while Vietcombank alone is assigned 10.5%. The limit of some joint stock commercial banks such as VIB, ACB, Sacombank is 8.5-9.5% and MB, VPBank, Techcombank is 10.5-12%.

Many businesses are still at a standstill

Although credit growth is positive, according to experts, cash flow has not been able to go into production and business.

According to economic expert Dr. Dinh The Hien, credit flow in the first five months of 2021 growing at a rate of nearly 5% is reasonable, contributing to GDP growth.

But it is not excluded that credit cannot completely go into normal production and business as in the 2017-2018 period, because the activities of many businesses are at a standstill, especially tourism, service, and transportation enterprises.

Besides, many fear that credit will flow into risky investment sectors such as securities and real estate. However, according to experts, the management agency has given instructions to limit lending to risky areas, and banks are also more cautious with real estate and securities credit.

According to Nguyen Tuan Anh, Director of the Credit Department for Economic Sectors (SBV), credit still flows into priority areas, there is no phenomenon of securities credit skyrocketing because the State Bank strictly controls the regulations. The massive new cash flow into the stock market recently can be from the idle money of individual investors, from other investment channels or from margin loans of securities companies. This issue is beyond the control of the State Bank.

Therefore, Dr. Dinh The Hien said that, with current liquidity, banks still have money to lend, the problem is whether businesses can create trust for banks in their ability to repay loans. Currently, lending interest rates are differentiated. Good businesses still enjoy low lending rates, high-risk businesses must accept interest rate increases to offset risks.

Sharing the same opinion, economic expert Dr. Nguyen Tri Hieu said that for effective credit growth, it is necessary to further stimulate demand. When lending, banks must control the repayment source of customers to still achieve the target of credit growth while ensuring credit quality.

Previously, leaders of the State Bank had said that the current credit balance/GDP is over 140%, so banks must ensure credit expansion in parallel with credit quality, increase credit growth in the field according to the requirements of the State Bank of Vietnam in accordance with the policy of the State Bank and the Government.

Moreover, the credit structure must match the capital structure to prevent the risk of term difference and ensure the ability to pay people at any time.