State Bank of Vietnam (SBV) has asked credit institutions to limit their lending to the real estate and construction sectors to better control bad debts (Photo: vietnamfinance.vn) Hanoi (VNA) - The State Bank of Vietnam (SBV) has asked credit institutions tolimit their lending to the real estate and construction sectors to bettercontrol bad debts.
Under Document 563/NHNN-TTGSNH issued recently,SBV asked lenders to avoid too much focus on real estate customers and maintaincredit growth in the sectors within safe limits.
The institutions must keep a close watch onlending to the sectors, continuously review and assess the progress of realtyprojects and their developers’ financial condition, particularly as it relatesto their collateral assets, and have measures in place to handle any defaults,SBV said in the document.
Besides evaluating and processing lendingapplications with scrutiny, the institutions must also monitor borrowers toensure that they refrain from using consumer loans for investment in propertyor securities.
Credit expansion should go hand in hand withstrict supervision to ensure loans are used for their intended purpose and donot add to bad debts, the document said.
As an alternative, commercial banks were asked toincrease their lending to the manufacturing, production and business sectors,particularly those in need of capital for growth, such as agriculture, export,supporting industries and small- and medium-sized enterprises.
This is not the first time the central bank hastold local lenders to tighten the valve on credit meant for the real-estate andconstruction sectors. The move was made after consumer lending accelerated lastyear and a significant amount of consumer loans went to the real estate sector.
According to the National Financial SupervisionCommittee, the growth rate of consumer lending last year was three times higherthan the average credit growth rate of 18 percent to reach 1.17 quadrillion VND(51.54 billion USD).
Notably, some banks dodged credit regulations byoffering lending packages supposedly earmarked for “house repairs” or “houseconstruction” to consumer credit customers. Loans for house repairs andconstruction last year soared 76.5 percent and accounted for nearly 53 percentof total consumer loans.
Pham Manh Thang, deputy general director ofVietcombank, said the capital limit in the real estate and securities sectorswould help the banking system develop sustainably as banks would have to selectfeasible property projects to provide loans, avoiding non-performing loans infuture.
Bad debts in the country’s banking sector, mostlyincurred due to a slowdown in the country’s real estate market in the early2010s, had been cut to 2.3 percent by the end of 2017, down from 2.46 percentat the end of 2016, according to SBV.-VNA
Under Document 563/NHNN-TTGSNH issued recently,SBV asked lenders to avoid too much focus on real estate customers and maintaincredit growth in the sectors within safe limits.
The institutions must keep a close watch onlending to the sectors, continuously review and assess the progress of realtyprojects and their developers’ financial condition, particularly as it relatesto their collateral assets, and have measures in place to handle any defaults,SBV said in the document.
Besides evaluating and processing lendingapplications with scrutiny, the institutions must also monitor borrowers toensure that they refrain from using consumer loans for investment in propertyor securities.
Credit expansion should go hand in hand withstrict supervision to ensure loans are used for their intended purpose and donot add to bad debts, the document said.
As an alternative, commercial banks were asked toincrease their lending to the manufacturing, production and business sectors,particularly those in need of capital for growth, such as agriculture, export,supporting industries and small- and medium-sized enterprises.
This is not the first time the central bank hastold local lenders to tighten the valve on credit meant for the real-estate andconstruction sectors. The move was made after consumer lending accelerated lastyear and a significant amount of consumer loans went to the real estate sector.
According to the National Financial SupervisionCommittee, the growth rate of consumer lending last year was three times higherthan the average credit growth rate of 18 percent to reach 1.17 quadrillion VND(51.54 billion USD).
Notably, some banks dodged credit regulations byoffering lending packages supposedly earmarked for “house repairs” or “houseconstruction” to consumer credit customers. Loans for house repairs andconstruction last year soared 76.5 percent and accounted for nearly 53 percentof total consumer loans.
Pham Manh Thang, deputy general director ofVietcombank, said the capital limit in the real estate and securities sectorswould help the banking system develop sustainably as banks would have to selectfeasible property projects to provide loans, avoiding non-performing loans infuture.
Bad debts in the country’s banking sector, mostlyincurred due to a slowdown in the country’s real estate market in the early2010s, had been cut to 2.3 percent by the end of 2017, down from 2.46 percentat the end of 2016, according to SBV.-VNA
VNA
