Vietnam's banking credit is expanding at a very slow pace and it's unlikely that it can help economy achieve its 6.5 percent growth target for the year, bankers say.
Hanoi-based Techcombank said credit contracted in January. It began to pick up last month but progress was really slow.
Nguyen Duc Vinh, general director of Techcombank, said as the global economy has not fully recovered yet, many companies are not so sure about their business this year.
Asia Commercial Bank General Director Ly Xuan Hai said the lender has earmarked VND30 trillion (US$1.5 billion) to provide loans at interest rates of 15-16 percent for 2010.
However, credit this year has expanded much more slowly than in previous years, he said.
"I've got a feeling that businesses are having difficulties in selling their products, and so their demand for loan has shrunk."
Analysts also said that with interest rate subsidies no longer available and rates on medium and long term loans surging, many companies are hesitant about taking loans.
The government in January 2009 offered VND17 trillion in subsidies to encourage banks to extend credit to businesses during last year.
In late February this year, the central bank allowed banks to offer more loans at negotiable interest rates. Previously, rates on all loans except for consumer loans were capped at 1.5 times the central bank's benchmark base rate. Following the deregulation, lending rates have risen to as high as 20 percent a year.
Bankers said although they know many businesses are put off by the new high rates, they are not in a position to lower their rates.
"Banks can only cut their lending rates gradually after deposit rates fall," the general director of a bank in Hanoi said.
Vietnam's banking credit rose 1.14 percent in February from a month earlier, very low compared with the full-year target of 25 percent. Credit grew only 1 percent in January. Last year's credit growth was 38 percent.