Finance committee wants credit growth target reduced further

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The National Financial Supervisory Committee says Vietnam's credit growth target should be revised down to 15 percent to ensure loans do not expand too fast in the next few months, putting economic stability at risk.

The central bank has capped credit growth at 20 percent this year, but loans expanded at a much slower pace than expected, growing only 7.23 percent in the first seven months, new website VnExpress said, citing a report of the Supervisory Committee last week.

According to the report, the low credit growth rate has had negative impacts on the economy in the past months while leaving too much room for loans to expand in the rest of the year.

If the target is left unchanged, credit growth could reach 2.6 percent each month from August to December, the committee said, adding that "such a rate would be too high."

The committee has, therefore, proposed a cut in the target to keep loans from expanding by more than 2 percent each month.

It also said the government should restrict credit growth for 2012 at 20 percent and money supply growth at 16 percent to balance economic benefits with banking risks, VnExpress reported.

Vietnam's central bank has raised interest rates several times this year, including its repurchase, refinancing and discount rates. In an attempt to limit credit growth in foreign currencies it also raised dollar reserve ratios late last month.

Moody's said in a report on September 1 that credit growth in Vietnam is slowiing down after a rapid increase over the past two years. The rating agency said Vietnam's banking system outlook over the next 12 to 18 months remains negative.

Central bank governor Nguyen Van Binh told the press on the same day that it was not necessary to max out the credit target of 20 percent. He also allayed concerns that lending would grow at too rapid a pace in the final months.

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