HA NOI— The Government asked the State Bank of Viet Nam on Wednesday to address liquidity issues in the domestic banking system by the end of March this year, alongside lowering interest rates.
|A transaction at a Ha Noi-based branch of Ocean Bank. Liquidity has been one of the biggest challenges for commercial banks in recent months due to the central bank's tightened monetary policies. —VNS Photo Truong Vi
In recent months, liquidity has been considered one of the biggest challenges to commercial banks due to the central bank's tightened monetary policies to curb inflation.
Meanwhile, Do Ngoc Quynh, an official at the Bank for Investment and Development of Viet Nam (BIDV) told Dau tu Chung Khoan (Securities Investment) newspaper that banks' low liquidity was caused mainly by banks using short-term deposits to lend medium and long-term loans. Also, under pressure to meet credit growth and profit forecasts, banks have lent a significant amount of money to the real estate and securities industries.
Although the central bank has allowed institutions to use a maximum of 30 per cent from short-term deposits to lend medium and long-term loans, many banks and credit institutions have lent up to 70 per cent. Some have lent a large volume to real estate and securities companies, causing difficulties in collecting debts in stagnant markets.
At the monthly Government meeting held in Ha Noi last Saturday, Nguyen Thi Hong, director of the State Bank's monetary policy department, said the liquidity of credit institutions had improved since Tet, with banks and credit institutions attracting a significant volume of deposits.
Meanwhile, several banks holding a large volume of gold have requested permission from the central bank for gold exports in order to improve liquidity.
In recent days, the inter-bank market has experienced a decline in interest rates. The overnight interest rate fell to 13.52 per cent last Saturday, while the one- and three-month term rates were posted at 11.95 per cent and 9.5 per cent, respectively.
"As the SBV plans to allocate credit growth rates to banks and credit institutions this year, liquidity in the domestic banking system is expected to improve significantly," senior economist Nguyen Tri Hieu said.
Accordingly, commercial banks and credit institutions will be allocated growth based on the health of the organisation and their performance last year. Institutions will be classified into four groups based on SBV criteria, with well-performing lenders classed in group A and weaker lenders in group D.
However, he also said that to mobilise more resources from money deposits, the macro economy must be stable with reasonable inflation rates.
According to Government Resolution No 3, the central bank is also urged to co-operate with other relevant bodies to roll out solutions in helping credit institutions lend more loans to agricultural production, rural development, production for exports, processing and supporting industries and small and medium-sized enterprises employing a huge number of local workers. — VNS