Increased demand for credit in the economy, at a time when banks have their credit quota stretched to the limit, is putting pressure on companies struggling to raise new sources of capital.

Production of home appliances at Sunhouse Group. Photo: Thanh Hai/The Hanoi Times

In recent months, the fact that the State Bank of Vietnam (SBV) has increased its official interest rates has led to a rise in commercial bank interest rates.

A bank’s representative in Hanoi said the move is necessary to ensure their liquidity and retain customers.

At present, some banks offer the average interest rates in Hanoi at 12-14% per annum or even 16% per 12-month deposit.

But even with such high-interest rates, many businesses still struggle to access credit.

The Ho Chi Minh City Real Estate Association (HoREA) has recently suggested that the SBV expand banks' credit quota by 1-2 percentage points.

"An expansion of the credit room by 1 to 2 percentage points would inject around VND200 trillion (US$8.05 billion) into the economy to address the lack of capital in the economy, including the real estate market. Property developers, investors, and buyers are still seeking credit even with higher interest rates," said HoREA Chairman Le Hoang Chau.

Not only real estate firms but also those in the manufacturing sectors are facing a shortage in working capital and waiting for the SBV to expand the credit quota for banks.

Vice Chairwoman of the Hanoi Association of Women-Owned Small and Medium Enterprises (HAWA SME) Nguyen Thu Ha said the need for capital is set to increase in the year-end period due to rising orders and higher consumer demand.

Meanwhile, Vice Chairman of the Hanoi Supporting Industries Business Association Nguyen Van said rising operation costs and prices of input materials are putting pressure on local businesses to remain profitable.

Van called for banks to provide more support for businesses regarding preferential lending rates and restructuring debt payment schedules, saying these moves are necessary for them to maintain operations.

“Banks should pay more attention for businesses in the supporting industries to access to long-term credit, as any investment would need at least 5-10 years to start having profit,” he noted.

From the banks’ perspective, General Secretary of the Vietnam Banks Association Nguyen Quoc Hung said the banking sector is in distress.

“As of late October, the credit growth expanded by 11.5% year on year, but the capital mobilization rate stood at 4.8%. So banks are also having issues securing more capital for lending,” Hung said.

According to experts, the SBV could consider raising the credit growth target to 15-16% instead of the current 14% to cope with the growing demand for credit during the year-end period.

In addition, banks with higher credit room could inject more capital into the economy and help improve the financial situation of companies, but the main issue should be to ensure that credit is channeled to the right sector to maximize efficiency.

Prime Minister Pham Minh Chinh, during a meeting with voters in Can Tho, said the Government has instructed the banking sector to provide support for businesses by cutting costs and fees for businesses.

Chinh said the bank should consider raising the credit growth targets but only at an appropriate level to both support growth and ensure the security of the sector.

SBV Governor Nguyen Thi Hong reaffirmed the Government’s stance of preventing credit from pouring into fields of high risks or being subject to speculative investment.

“The central bank’s objective is to promote credit into priority fields, control inflation, and stabilize the macro economy,” Hong said.