State Bank of Vietnam (SBV) governor, Hong Thi Nguyen, has said that the 14 percent limit on bank lending each year will not be removed, Reuters is reporting. She said that removing the limit could result in excessive lending.
Some context: Last year, Vietnam’s credit growth limit was reached in October. But with the US dollar strengthening against the local currency the SBV was reluctant to let banks lend more. When the new year began and credit became available many firms no longer qualified for loans after selling assets to keep themselves afloat in the interim.
This year, credit growth had reached just 7.1 percent by the end of October barely half of the 14 percent target for the year–it has become pretty clear businesses are no longer interested in borrowing. As a result, the dong has found itself under increasing downward pressure again and it is nearing the same low that it was at last year when banks ran out of room to lend–essentially, the local currency is back to where it was in October of last year, but this time because no one wants it.
In this context, businesses and business groups have called for the credit growth limit to be removed. Calls the SBV, per this article from Reuters, has rejected.