Banks are also desperately searching for borrowers.

Credit growth in recent times has been lower compared to the same period in previous years. According to many banking experts, the reasons include decreased credit demand, difficulties in capital absorption by businesses and the economy . Some customer groups have a need for credit but do not meet the loan conditions or are still facing legal procedural obstacles.

Many coordinated policies are needed to stimulate consumer demand.

• The economy is very difficult, consumer demand is weak.

Many bank leaders say that banks are also under pressure to increase credit growth, which is linked to KPIs (Key Performance Indicators), but even after searching extensively, very few customers meet the criteria for lending.

According to Mr. Le Ngoc Lam, General Director of BIDV : In the first five months of the year, BIDV's credit growth was approximately 5.5%, higher than the banking industry average of 3.17%; capital mobilization achieved a higher growth rate than the average in the banking system; and credit quality indicators were also controlled.

“Despite the challenging situation faced by customers, in accordance with the directives of the Government and the State Bank of Vietnam (SBV), BIDV has stood by businesses to overcome these difficulties. After three reductions in the policy interest rate by the SBV, BIDV has lowered both deposit and lending interest rates. Furthermore, BIDV has implemented Circular No. 02/TT-NHNN of the SBV Governor, which stipulates that customers facing difficulties in production and business activities and in repaying loans for living expenses and consumption are eligible for debt restructuring while maintaining their loan classification,” said Mr. Le Ngoc Lam.

According to BIDV's leadership, the difficult economic situation has significantly impacted the banking sector. Businesses face difficulties first, and the banking industry is affected accordingly, typically 3-6 months later. From the end of 2022 until now, businesses have seen a decline in orders, leading to a decrease in credit demand in the first few months of this year.

“The banking sector acts as an intermediary, receiving deposits from the public. People come to the bank to deposit money, and the bank is not allowed to refuse. If a bank receives deposits but cannot lend them out, its business will be ineffective and result in losses. Banks want to be able to lend to generate profits. Due to weak economic demand, reduced people's incomes, and very low capital absorption, the demand for loans has dropped sharply, for example, in consumer spending, home investment, and the real estate market is sluggish. BIDV also hopes that in the coming time, interest rates will continue to fall, stimulating investment and consumption demand from businesses; however, there will also be a time lag,” a BIDV leader expressed his concern.

Emphasizing the challenging economic situation this year, Mr. Tran Minh Binh, Chairman of the Board of Directors of VietinBank, stated: VietinBank has been very proactive in implementing the policies of the Government and the State Bank of Vietnam, which include actively regulating deposit mobilization and saving costs. “The implementation of the 2% interest rate support policy under Decree 31/2022/ND-CP is facing many difficulties, but within the banking system, VietinBank is considered to be providing the best support.”

Currently, VietinBank's business performance remains on track with plans and expectations, but difficulties emerged in May 2023. In the first five months of the year, the bank's total assets reached VND 1.82 trillion, a 0.7% increase compared to the end of 2022; outstanding loans reached VND 1.34 trillion, a 6% increase compared to the end of 2022. If the total outstanding loans of the entire banking sector increased by more than 3% compared to the end of 2022, VietinBank would have doubled the industry's credit growth. Loan disbursements have been made in accordance with the Government and State Bank of Vietnam's guidelines, focusing on the processing and manufacturing industries, production and business activities, and five priority sectors; the non-performing loan ratio is well controlled.

According to many banking experts, the banking market currently has over 100 credit institutions, leading to fierce competition and a large number of vendors. If a business cannot obtain a loan from one bank, it can access capital from another; however, the business must meet the requirements according to the standards of the banking industry.

According to Deputy Governor of the State Bank of Vietnam Pham Thanh Ha, the banking system is making great efforts to attract customers to boost credit growth, but is still facing common difficulties that are slowing down credit growth. As of the end of May 2023, credit reached VND 12.3 million billion, an increase of 3.17% compared to the end of 2022.

Of these, state-owned commercial banks, which account for approximately 44% of the credit market share, have only achieved about 35% of their credit growth target set by the State Bank of Vietnam; while joint-stock commercial banks have achieved about 50% of their target. Thus, both of these groups (which account for the majority of the credit market share) still have considerable room for growth in the remainder of this year.

Looking back at the same period in 2022 (up to the end of May 2022), credit increased by approximately 8% compared to the end of 2021. Thus, under the condition that the State Bank of Vietnam's credit policy remains unchanged (the credit growth target for 2022 is 14%, slightly higher this year, from 14% to 15%), the fact that credit growth is so low clearly indicates that the economy's ability to absorb capital is weak, significantly weaker than last year.

Deputy Governor Pham Thanh Ha cited three main reasons: Firstly, for manufacturing businesses, product consumption is facing difficulties due to a lack of orders, leading to a decrease in demand for new loans for production; secondly, for small and medium-sized enterprises, some businesses have weak financial situations and lack feasible plans, thus failing to meet the loan requirements of banks; thirdly, regarding real estate credit, many real estate projects are facing difficulties, mainly legal issues, with few new projects being launched, thus reducing the demand for real estate credit.

• Banks continue to offer loan packages and reduce interest rates to stimulate demand.

Speaking with a reporter from the Tin Tuc newspaper, Mr. Ho Nam Tien, General Director of Lienvietpostbank (LPB), said: "Reducing interest rates and supporting businesses at this time is very necessary. LPBank is committed to continuing to proactively and pioneeringly cooperate with the Government."

According to Mr. Ho Nam Tien, in less than a month, LPBank has reduced interest rates for the third time. Currently, LPBank has allocated 8,000 billion VND to implement a preferential interest rate program for short-term business loans for individual and corporate customers, with preferential interest rates starting from only 7.5% per year. LPBank has developed a policy to reduce interest rates on loans with a limit of 5,000 billion VND for corporate customers and 3,000 billion VND for individual customers.

“The lending interest rate for corporate customers starts from 7.5%/year and for individual customers from 8.5%/year. This is also one of the timely policies of the Bank to support the State Bank of Vietnam in resolving difficulties for businesses, especially those businesses that need short-term loans to serve production and business, particularly in the context where many businesses have to borrow at interest rates above 10%,” Mr. Ho Nam Tien shared.

Besides adjusting down lending interest rates, the Bank also implemented many solution packages to provide flexible financial solutions for customers. LPBank officially launched the "Super-fast Business Loan within 24 hours" product, with the outstanding advantage of credit approval notification within 24 hours, simple and flexible application procedures.

"We will continue to direct organizations to implement this policy to support existing loans to businesses. As for new loans, banks will continue to actively lend to eligible customers. Clearly, the banking system mobilizes capital to lend, so eligible customers will certainly have access to credit," Deputy Governor Pham Thanh Ha stated.

Besides solutions from the banking sector, Deputy Governor Pham Thanh Ha believes that increasing demand in the economy is crucial. Therefore, ministries and agencies need to continue promoting policies to support businesses, develop small and medium-sized enterprises, promote, seek, develop, and resolve difficulties in the consumer market and real estate market, thereby alleviating difficulties for businesses as well as improving financial capacity and access to credit.

The State Bank of Vietnam will continue to direct commercial banks to reduce operating costs so that they can further lower interest rates and share profits with businesses; restructure debts, and amend some points of Circular 39/2016/TT-NHNN regulating lending activities of credit institutions and branches of foreign banks to customers in a way that is "more open but not lowering standards".

The General Secretary of the Vietnam Banking Association, Mr. Nguyen Quoc Hung, once shared: The State Bank of Vietnam needs to continue supporting liquidity for banks by strengthening open market operations (OMO) tools… prioritizing meeting the maximum capital needs of banks through the OMO channel. This will reduce the pressure of high liquidity reserves for banks, contributing to lowering interbank transaction interest rates as well as deposit interest rates from customers.

In the long term, it is necessary to amend and supplement several legal documents such as Circular 39, Circular 22, and the draft revised Law on Credit Institutions... in order to promptly issue and complete the legal framework for credit institutions to operate stably, soundly, and effectively.