At the Government Standing Committee's working session with joint stock commercial banks on solutions to contribute to the country's socio-economic development on the afternoon of September 21, Deputy Governor of the State Bank of Vietnam Pham Quang Dung said that credit growth of the entire system improved compared to the same period last year.

As of September 16, 2024, credit growth reached 7.26% compared to the end of 2023 (the same period reached 5.73%). In particular, credit growth of the private joint stock banking sector increased by 8.48%, accounting for 45% of the market share, the highest increase in the whole system. Credit growth for all sectors has improved compared to the same period in 2023, the credit structure is in line with the orientation of economic restructuring.

According to the Deputy Governor, since the beginning of 2024, the SBV has assigned the entire credit growth target at about 15%. Recently, the SBV has continuously improved the assignment and management of credit growth targets.

However, it is not possible to stop applying this measure because the situation of hot credit growth and interest rate competition like the period before 2011 may return, causing macroeconomic instability and increasing inflation risks, increasing bad debt risks, affecting the safety of the banking system.

Regarding credit quality, as of the end of July, the on-balance sheet bad debt ratio of the credit institution system was at 4.75%, increased from 4.55% at the end of 2023 and 2.03% at the end of 2022.

As for the private joint stock commercial bank sector, as ò the end of June, the on-balance sheet bad debt amount was VND 633,000 billion, an increase of 4.8% compared to the end of 2023, accounting for 79.65% of the the on-balance sheet bad debt amount of the whole system, the bad debt ratio was at 7.77%.

Most credit institutions met the safety ratios in their operations. As of the end of the second quarter of 2024, the capital adequacy ratio of the banking system was 11.96%, of which the State-owned commercial bank sector at 9.77%; the private joint stock commercial bank sector at 11.86%.

The Deputy Governor also said that the average lending interest rate for new and existing loans continued to decrease sharply, as of August 2024 it had decreased by more than 1%/p.a. compared to the end of 2023. The State Bank of Vietnam directed credit institutions to publicly disclose interest rates on their websites. In particular, lending interest rates for private joint-stock commercial banks decreased by about 0.96%; currently at 9.17%, higher than the entire system and the group of state-owned commercial banks,

During periods of increased pressure, the State Bank intervened by selling foreign currency to support market liquidity and meet legitimate foreign currency demand, and stabilize the foreign exchange market. The private commercial joint stock bank sector accounted for about 66% of total foreign exchange transactions in the entire system and 30% of the market share in transactions with customers.

The State Bank has also been perfecting the legal framework and supporting customers facing difficulties by issuing many legal documents on credit granting activities to take effect in a timely manner to be consistent with the Law on Credit Institutions 2024.

Kylie Nguyen