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Vietnam’s credit growth is slowing down

Tuesday 23, 06 2020
Due to the impact of the Covid-19 epidemic, demands for capital of enterprises and people have been low, leading to lower credit growth in the first 6 months.
Vietnam’s credit growth is slowing down

Credit growth decreased

The State Bank of Vietnam (SBV) has held a press conference about banking activities in the first half of 2020. At the meeting, representatives of the SBV's Departments gave information about the results of some monetary policies and banking activities in the first 6 months of the year.

Accordingly, the SBV has proactively, flexibly and prudently operated monetary policy, in close coordination with fiscal and other macroeconomic policies to control inflation, macroeconomic stability, money and foreign exchange markets, and support economic recovery when facing the complicated movements of the Covid-19 epidemic.

Specifically, as of May 29, 2020, total M2 payment facilities increased by 3.4% compared to the end of 2019.

In operating interest rates, since the beginning of 2020, the State Bank of Vietnam has reduced interest rates twice, with a total reduction of 1.0-1.5% / year to support the liquidity of credit institutions, facilitating access to low-cost capital from the SBV; reduced deposit interest rate for terms of less than 6 months by 0.6-0.75% / year and short-term lending interest rate cap for prioritized sectors by 1% / year (which is currently at 5.0 % / year) to support the reduction of borrowing costs for businesses and people. Accordingly, the market interest rate level tends to decrease compared to the beginning of the year.

Regarding exchange rates, although the international market is complicated, the exchange rate and the foreign currency market in Vietnam are stable; the liquidity is smooth, and legal demand for foreign currency of the economy is fully and promptly met.

Regarding solutions to support businesses and people negatively impacted by the Covid-19 epidemic, after more than 02 months of drastic implementation, all credit institutions, including foreign financial companies and banks have strongly been involved.

According to the State Bank, as of June 8, credit institutions had rescheduled the repayment term for 249,108 customers with VND 172,365 billion of debt; exempted, reduced and lowered interest rates for 403,177 customers with outstanding loans of VND 1,227,349 billion; offered new loans with preferential interest rates for 225,514 customers, with interest rates from 0.5 - 2.5% lower than before.

Particularly, Vietnam Bank for Social Policies (VBSP) has extended the debt of VND 3,856 billion to 152,796 customers, adjusted the debt repayment term of VND 1,567 billion for 75,209 customers, offered new loans for 826,473 customers with outstanding loans of VND 31,149.2 billion.

However, according to the SBV, under the impact of the Covid-19 epidemic, due to low credit demand, as of May 29, 2020, credit growth increased by only 1.96% compared to the end of 2019. By June 16, credit growth reached 2.13% compared to the beginning of this year. This is still very low compared to the first 6 months of 2019.

Cashless payment is on the rise

Vietnam’s credit growth is slowing down

In the field of payment, the legal framework for payment activities continues to be reviewed, supplemented and created more favorable conditions for the development of cashless payments. In the first months of 2020, although affected by the Covid-19 epidemic, payment activities still experienced a significant growth compared to the same period last year.

Payment via cards, Internet and mobile phones in the first 4 months of 2020 all achieved a strong growth compared to the same period in 2019: (i) domestic payment via bank cards increased by 26.2% in volume and 15.7% in value; (ii) payment via Internet increased by 3.2% in volume and 45.7% in value; (iii) mobile payment increased by 189% in volume and 166.1% in value over the same period in 2019.

Non-cash payment instruments are gradually dominant. Public service payment continues to be widely expanded. The SBV has timely directed banks and payment intermediaries to coordinate the implementation of electronic payment on the National Service Portal.

In addition, the whole banking system has also been active in exempting and reducing fees for a number of payment services to support people and businesses affected by Covid-19. It is estimated that the total amount of payment service fee that banks have exempted or reduced for customers was about VND 1,004 billion.

>> 
Vietnam Credit and Company Credit Report

Source: SBV

 

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