Nguyen Tien Dong, head of the Credit Department at the State Bank of Viet Nam talks with Thoi Bao Kinh Te Viet Nam (Vietnam Economic Times) about credit allocation.
Could you explain more about credit growth?
Total bank credit growth in Viet Nam reached 8.3 per cent in August compared to same period last year. The highest growth of 19 to 20 per cent was registered in lending to businesses applying hi-technology. This was followed by 10.9 per cent growth in the property sector and 8.6 per cent in the agricultural sector.
Recently, some people said that the State Bank of Viet Nam had permitted commercial banks to expand total credit to try and reduce the ratio of non-performing loans. What is your comment?
This is a baseless assumption. Under regulations, commercial banks whose ratio of non-performing loans exceeds three per cent of the total outstanding loan won't be permitted to increase credit.
More credit was given to commercial banks having bad debts amounting to about one per cent of their gross loan portfolio. Banks with small credit base were also given more credit.
How do you evaluate the credit policy for the fisheries sector and fishermen?
Under Government Decree 67/2014/ND-CP, policies were introduced to boost the development of fisheries, including a programme on building high-capacity, steel boats for deep sea fishing.
The implementation of the decree is the job of the ministries of agriculture, finance and investment - and the State Bank of Viet Nam.
The State Bank's credit department has closely supervised loans by commercial banks and noticed that they are very active in their job. However, disbursement has been slow.
Firstly, a large number of fishermen did not meet financial guidelines, realising the credit was refundable when their applications were not approved local People's Committees.
Secondly the cost of fishing vessels suddenly soared. Before the decree was issued, a steel vessel sold for about VND12-13 billion (US$543,000-588,300) but after that, the price soared to 17 or 18 billion ($770,000- 814,000). A lack of corresponding capital was also an obstacle.
Under the Government decree, to get credit for a vessel worth VND18 billion ($814,000), a fisherman has to pay five per cent of the total value - about VND1 billion ($45,200).
For a wooden vessel of VND12 billion ($542,900), fisherman have to pay 30 per cent of the cost, about VND3.6 billion ($163,000). This was too much for most of them.
Thus, among 2,000 vessels allocated by the Ministry of Agriculture and Rural Development to localities under the plan, local authorities have approved only 800 vessels. Banks have disbursed money for 700 so far.
Another reason for the slowdown in disbursement is the limited capacity of ship building yards. Building the 2,000 fishing vessels is expected to take at least 10 years.
Could you explain why the State Bank put credit restrictions on transport projects under build-operate-transfer (BOT) and build-transfer (BT) models?
The main reason is that repayments would take too long, perhaps 15 to 20 years. If commercial banks grant too much credit, they will risk a liquidity shortage.
So far, the debt of BOT and BT transport projects totals VND118 trillion ($5.3 billion) provided by three or four big banks. If the debt was split among many banks, the risk of liquidity shortage would be small.
The State Bank of Viet Nam has discovered some problems relating to the financial capability of many project investors.
For example, when applying for credit for a VND5 trillion ($226 million) project, the investors declared the registered capital of VND1 trillion ($45 million). But after checking, they were found to have nothing. — VNS