Removing Credit Room: Opportunity for acceleration or inflation risk?

"Urgently consider removing administrative tools on credit limits, replacing them with credit growth management according to market mechanisms... developing a set of criteria for credit safety control." That was the direction of Prime Minister Pham Minh Chinh when discussing the direction of credit management in the new period.

Currently, the assignment of annual credit growth limits only applies to domestic commercial banks. Experts believe that when the credit room is removed, capital will be allocated more effectively, increasing the bank's initiative, and at the same time, in line with international practices.

Businesses need, banks must "pave the way"

Bỏ ROOM tín dụng: Cơ hội bứt tốc hay rủi ro lạm phát? - Ảnh 1. — *Mr. Le Hoai An - Banking strategy analyst*

Mr. Le Hoai An - Banking Strategy Analyst, WiGroup Joint Stock Company, said: “From 2011-2019, the credit room was still effective when directing capital flows to retail and sustainable growth. But in 2023-2024, the picture has changed. Personal credit has decreased, while businesses need more capital. The room has become a major constraint for businesses to plan their development. When removing the room, banks are forced to plan long-term, from capital mobilization to risk management, thereby better supporting the private sector - in the spirit of Resolution 68".

“Speed Limits” on the Financial Highway

Bỏ ROOM tín dụng: Cơ hội bứt tốc hay rủi ro lạm phát? - Ảnh 2. — *People perform procedures at bank counters*

According to Dr. Ngo Ngoc Quang - Lecturer at Banking University of Ho Chi Minh City: “Credit room is like limiting the speed on the highway. We are building a financial highway for international integration, but we limit the speed. Removing the room shows the shift from administrative management to market mechanism, moving towards Basel III standards and upgrading the Vietnamese market”.

He believes that it is possible to pave the way for large banks, especially state-owned banks, to take the lead in leading the market.

Concern and necessary caution

Some opinions are concerned: removing room may increase bad debt risks, inflationary pressure, unfair competition and difficulties in macro management.

Bỏ ROOM tín dụng: Cơ hội bứt tốc hay rủi ro lạm phát? - Ảnh 3. — *Ms. Phung Thi Binh - Deputy General Director of Agribank*

However, Ms. Phung Thi Binh - Deputy General Director of Agribank, said: "Even when the limit is removed, commercial banks still have to make credit plans in accordance with their financial capacity, comply with a series of regulations on capital safety, risk management according to Circulars 41, 22, 13... Therefore, there is no way to increase it as much as you want."

Bỏ ROOM tín dụng: Cơ hội bứt tốc hay rủi ro lạm phát? - Ảnh 4. — *Mr. Pham Chi Quang - Director of Monetary Policy Department, State Bank*

On the management side, Mr. Pham Chi Quang - Director of the Monetary Policy Department, State Bank, emphasized: "To remove the credit growth target, a comprehensive solution is needed, both enhancing the autonomy of credit institutions and ensuring system safety, economic security, and controlling inflation. If the room is removed, the increase in outstanding credit balance can push up interest rates. Therefore, the State Bank will have to be very proactive in managing interest rates - this is a matter to consider carefully in the coming time."

Bỏ ROOM tín dụng: Cơ hội bứt tốc hay rủi ro lạm phát? - Ảnh 5. — *Direct transaction activities at the bank*

"Leave the ceiling" but not "leave the brakes"

Experts say that past lessons show that caution is necessary. Removing the credit room does not mean loosening up, but rather changing the way of control – from administrative to market.

To operate the new mechanism, three layers of safety “railway” need to be built:

State Bank's operating framework: strengthen indirect tools such as interest rates and required reserves; enhance monitoring and post-auditing based on real-time data.
Risk management capacity of each bank: credit planning in accordance with financial capacity, compliance with Basel III.
Capital market infrastructure outside the banking system: developing bond and stock markets to share capital pressure.

With a clear roadmap and careful preparation, removing credit room can be a boost to help capital flow more effectively, promote the private sector, and maintain safety for the entire system.