Why can't the State Bank remove credit room?

According to the report of the State Bank of Vietnam (SBV) on the implementation of Resolution No. 62/2022/QH15 on questioning activities at the 3rd Session of the 15th National Assembly , it is not yet possible to completely end the assignment of credit growth targets.

The reason pointed out by the State Bank is that in the context of the burden of capital supply for the economy still mainly falling on the bank credit channel, if there are no measures to control credit growth, it will lead to the possibility of repeating the consequences as in the period before 2011, causing macroeconomic instability, increasing inflation risks, and at the same time increasing bad debt risks, threatening the safety of the banking system.

Meanwhile, the credit institution system is still in the process of restructuring and handling bad debts, gradually improving governance standards according to international practices.

Therefore, the State Bank believes that maintaining the credit limit tool is necessary to ensure the safe operation of the banking system. "The removal of this measure must be cautious, with an appropriate roadmap, ensuring the necessary conditions when there are sufficient control measures, suitable replacements and step-by-step implementation in accordance with market conditions," the State Bank affirmed.

From 2023 onwards, the SBV assigned credit growth targets to each credit institution. To continue implementing the National Assembly and Government 's policy of gradually removing the assignment of credit growth targets, in August 2024, the SBV continued to announce that a number of credit institutions would be allowed to proactively increase credit growth in 2024.

According to the State Bank of Vietnam, credit growth has so far been safe, effective, and healthy, limiting the increase and occurrence of bad debts, ensuring the safe operations of credit institutions; directing credit to production sectors and priority areas - the driving force of economic growth; and strictly controlling areas with potential risks.

As a result, by September 30, 2024, the entire system's credit increased by 9% compared to the end of 2023 (increased by 6.92% in the same period). Currently, credit institutions still have a lot of room for credit growth targets to provide loans to the economy.

Source: https://vietnamnet.vn/vi-sao-ngan-hang-nha-nuoc-chua-the-bo-room-tin-dung-2455272.html