(Bloomberg) -- Vietnam’s Prime Minister Pham Minh Chinh urged banks to be more flexible in lending without compromising standards, as he sought to enlist their support to spur economic activity.
“We do not lower lending standards, but can we be more flexible?” the government said in a post on its website, citing Chinh’s remarks at a conference in Hanoi. “The development of banks and businesses are linked together and allied with the development of the economy.”
Chinh’s remarks mark his latest attempt to boost credit to support domestic economic activity, as weak external demand holds back Vietnam’s recovery. The prime minister’s call to lenders comes days after his deputy ordered a rare probe of the central bank’s functioning amid slowing credit growth.
“There are companies facing difficulties, but their projects are feasible, can they borrow,” Chinh asked at the conference, attended by bankers from 38 institutions to discuss solutions on faster credit to businesses. Executives from the real estate association and other industry groups were also in attendance.
Vietnam’s central bank has been under pressure to lower borrowing costs to support economic growth. The State Bank of Vietnam has already cut policy rates four times this year.
Chinh has repeatedly leaned on the central bank this year to ensure that lenders pass on the benefits of rate reductions to customers. Last week, the premier called on SBV to punish lenders imposing unrealistic loan terms.
Vietnam’s loan growth was 9.15% as of Nov. 30 from the end of 2022. That’s considerably lower than the government’s 2023 target for 14% to 15% credit expansion, news website VietnamPlus reported, citing State Bank’s Deputy Governor Dao Minh Tu at the same conference.
The central bank last week said it will raise the credit growth target for some banks that have already reached 80% of their lending quotas, according to a statement on the regulator’s website.
The monetary authority will continue to closely watch bank lending as well as market developments to timely regulate credit quotas among lenders to ensure sufficient money supply for the economy, VietnamPlus reported, citing SBV’s Tu. The central bank will continue to push lenders to pare their operational costs which can in turn help them lower lending rates, according to the report.
Vietnam’s economy expanded 4.24% in the first three quarters, below the trend seen over the past decade and not counting the pandemic. Chinh seeks to return gross domestic product growth to 6% to 6.5% in 2024 from an estimated 5% this year.
(Updates with the central bank’s comments in the 7th and 9th paragraphs.)
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