Vietnam bank lending increases for 1st time in 2014

By Ngoc Nguyen, TN News

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Vietnam bank lending increases for 1st time in 2014

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Last month banking credit grew for the first time this year, according to a report released recently by the State Bank of Vietnam.
The banking industry, which targets full-year growth of 12-14 percent, saw lending increase by 1.35 percent, it said.
Banks had reported negative growth of 0.65 percent and 0.55 percent in February and January.
With inflation still slowing -- prices rose by 4.39 percent year-on-year in March -- the positive credit growth would abet economic growth, it added.
The central bank attributed the slow credit growth to low demand, but said it is a good sign since money has mainly been flowing into strategic sectors like exports and supporting industries.
But the report showed marginal growth or even decline in borrowing by agricultural and small and medium-sized enterprises.
The central bank said due to the sluggish credit growth, banks have increased their buying of government bonds.
They bought 83 percent of the total bonds for VND81.6 trillion (US$3.87 billion), as of March 28.
Analysts said banks’ large-scale buying of bonds is no big deal since credit growth typically slows in the first quarter while it is also a prime time for the government to raise money from bond issuances.
But Dau Tu (Investment) online newspaper quoted an unnamed economist as warning that it would be a worry if banks continue to focus on buying bonds since they would then not bother to reduce interest rates further.
Loan rates have fallen to 9-11 percent on average, the same levels as in 2005-06.

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