Banks struggle to find borrowers

Total loans as of June 15 were at VND12.3 quadrillion, up 3.36% since the beginning of the year, and nearly 9% year-on-year, according to the State Bank of Vietnam (SBV).

The slow credit growth rate was prompted by several factors, one of which is the fact that the economy is slumping and demand for investment has dropped as people tighten spending, said SBV Deputy Governor Dao Minh Tu.

Many companies are lacking orders and have been operating at minimum capacity, therefore they do not need capital, he added.

Bank employees said that they had trouble convincing customers to borrow more. Many have even returned their loans prematurely, according to Tu.

On the other hand, there are customers who need loans, but they fail to meet banks’ criteria, according to the deputy governor.

SBV has cut its policy rates three times this year to assist economic growth via credit channels.

Banks are offering deposit interests of around 5.8% a year, some 0.7 percentage points lower than the end of 2022.

Loan interest rates now hover at around 8.9% a year, down 1%.

Tu said central bank decisions often take time to have an effect on the economy.

But it is now crucial that banks accept the cutting of expenses to lower loan interest rates, he said.

In a recent report, stock brokerage SSI’s analytic unit, SSI Research, said that lowering loan interests alone would not be enough to spur economic growth.

Finding new markets for companies and implementing government solutions with more discipline will create a greater impact on the market, according to SSI analysts.