Banking sees good growth

The banking industry has made good growth this year despite internal and external challenges, said the State Bank of Viet Nam in a conference on 2009’s tasks for the banking sector in Hanoi on Tuesday.

The total amount of outstanding loans in the whole system has increased by 21%-22% compared with late 2007, with credits for the local private sector increasing the fastest, central bank governor Nguyen Van Giau said.

Credits for the local private sector surges 35%-37% while that for State-run enterprises rises by 12%-14%.

The central bank said loans for exporters regardless of economic sector has increased by 35%-37%, while capital for production and agriculture sectors has increased by 34%-36% and 30% respectively. Anti-poverty programs have also benefited much, as money supplied for needy families and other beneficiaries of social welfare programs has soared by 40%-42% year-on-year.

The overall money supply, according to the central bank, has risen by 16%-17% this year. Besides, the inter-bank rate average ups 5.4% and transaction rate among State-owned banks goes up by 8%-9%.

Of note is the fast reduction in interest rate.

“The ceiling lending interest rates at credit institutions has fallen strongly from 23%-24% to below 12.75% per year over the past few months,” said the central bank’s governor.

In 2008, the central bank has issued establishment licenses for three commercial banks, and approved incorporation for the three first foreign-invested banks in Vietnam. In addition, the central banks also licensed three bank branches and four financial companies with 100% foreign capital, three domestic financial firms and 29 people’s credit funds.

Banks have basically finished procedures to increase the chartered capital to VND1,000 billion as required, Giau added.

This year also has witnessed progress of technology modernization and development of non-cash means of payment in the banking industry. The number of personal account surges by 36% to 15 million this year with over 13 million cards issued.

In addition, over 7,000 automated teller machines (ATM) are equipped for the ATM system throughout the country.

* Prime Minister Nguyen Tan Dung has urged commercial banks to provide cheaper loans for the corporate sector, especially small and medium enterprises, to survive the economic downturn at home and abroad.

Speaking at a banking sector review meeting in Hanoi on Tuesday, he said, “I want to see the banks doing efficient and healthy business, but they should further lower interest rates to share the difficulties faced by borrowing enterprises.”

The banks and their corporate clients are mutually dependent. “The survival of the corporate sector is a lifeline for the banking sector,” he was cited by the online newspaper VnExpress.net as saying.

Given the underdeveloped capital markets, the economy still relies on funds from banks for growth, he said. “We place trust in the banking sector.”

He proposed lender banks consider lowering the interest rates for the earlier signed loan contracts with corporate clients as a way to help the country maintain economic growth under the current circumstances.

Highlighting the contributions of the banking sector in the past year, the Government leader said banks had played a part in the country’s 6.23% GDP growth in 2008.

This growth rate is lower than expected, but reasonable given the global economic slowdown, he said.

However, banks have expressed concern that it is increasingly difficult to raise capital from customers due to falling deposit and savings rates.

For the Government’s US$1 billion cash stimulus package, small and medium enterprises will also benefit from it as they employ a majority of the country’s workforce.

VnExpress.net said around 4% of the amount would be used to provide loan interest support for these enterprises and that if things go as smoothly as planned, around VND420 trillion in preferential loans, about one-third of the estimated outstanding loans in the system, will be made available. (SGT)