Credit drops in January

"The decline in credit is a pattern that has been recorded in recent years," said deputy governor of the State Bank of Vietnam Dao Minh Tu at a forum Tuesday, who explained that businesses were not interested in getting new loans at the beginning of the new year.

Another reason is that the economy as a whole is facing challenges and therefore people were not interested in acquiring loans.

"The State Bank of Vietnam has given generous credit growth quotas to banks since the beginning of the year," he said, adding that there were no policy obstacles for banks to give new loans.

Vietcombank saw outstanding loans dropping 2.3%, or VND30 trillion (US$1.22 billion), throughout January.

"Amid a decline in income due to economic challenges, people had less demand to apply for home loans," said CEO Nguyen Thanh Tung.

A shortage of new supply due to few new projects being approved also caused a drop in demand, he added.

Tung said that businesses were reluctant to apply for loans in the first month of the year, and generally companies were not willing to expand or invest in new projects.

Agribank CEO Pham ToanVuong said that the only way for credit to increase is that businesses make the decision to borrow more.

"It has never been easier for businesses to get loans. Banks even compete to give loans to customers with good credit scores," he said, adding that some customers are looking for new loans in other banks that offer lower interest rates.

The central bank this year targets a credit growth of 15% and gives each bank a quota right from the beginning of the year and will adjust the quota when needed.

Prime Minister Pham Minh Chinh had earlier ordered the central bank to increase funding to the economy to speed up recovery.