State Bank of Viet Nam Governor Nguyen Van Giau, in a press briefing on Friday, urged banks to take seriously the 20-per-cent ceiling for credit growth set for this year.

Commercial banks will need to tweak their 2011 lending strategies to ensure they keep within the limit, he said.

Banks planning for higher credit growth have to get express approval from the central bank which will consider their safety ratio and effect on the banking system.

Deputy governor Tran Minh Tuan expressed worry about the current rapid growth in credit. The rate was 4 per cent in the first two months, and is expected to top 15 per cent in the first half.

Giau confirmed the Government’s plan to gradually reduce loans to non-manufacturing sectors from the current 18.7 per cent to 16 per cent by year-end.

Total outstanding credit to non-manufacturing borrowers is now around VND431 trillion (US$20 billion).

Eighteen out of the 42 banks have over the 25 per cent proportion of loans for non-manufacturing sectors while 24 others hold a proportion of over 26 per cent.

Speaking about the gold market, Giau said the central bank planned to gradually stop trading in gold bullion.

It would stop issuing new licences for manufacturing gold bars and only allow traders to buy gold bars from the market, and not sell them for a while before completely halting the trade.

According to a SBV report following surprise checks, on Thursday Western Bank’s Ha Noi branch was found to be offering 17.8 per cent interest on deposits in disregard of the central bank’s ceiling of 14 per cent.

On February 16 Kienlong Bank’s branch in central highland Dac Lak Province was caught offering 15.7 per cent for one-month deposits.

The Governor has ordered the boards of the two banks to thoroughly review the violations and penalise the individuals and offices responsible.

Banks were considered as dependable trustees of their money by the public and so all actions by banks that erode that trust must be severely punished, he explained.

Nguyen Ngoc Bao, director of the central bank’s Monetary Policy Department, said since the 14 per cent interest rate cap was prescribed by a central bank circular, it was tantamount to a legal provision, meaning any violation would be penalised.

Earlier, in the absence of such a circular, violations could not be treated as a legal offence and punished, he explained.

Commercial banking system absorbs more liquidity: Report

More cash is flowing into the nation’s commercial banking system, while the amount of cash in circulation has declined significantly, according to a preliminary report on banking operations issued by the State Bank of Viet Nam.

Total deposits with credit institutions grew by an estimated 5.79 per cent in February, compared to the prior month.

Through February 22, the amount of cash in circulation outside of the banking system was estimated to have fallen by 16.1 per cent from January. This was a dramatic reversal from January, when the money supply rose 12.54 per cent over December of last year – although this may have reflected the influence of the Tet (lunar new year) shopping season.

Overall, in the first two months of the year, cash in circulation has risen 7.86 per cent since the end of 2010.

Credit growth also slowed to just 1.46 per cent in February, from a 2.71-per-cent pace in January, the State Bank announced.

Source: VNS