Hanoi (VNA) -The State Bank of Vietnam (SBV) has approved the extension of credit growthlimits for many commercial banks to support the country’s economic growth.

Vietcombank Chairman Nghiem Xuan Thanh said his bank is now able to increasecredit limits for the whole of 2017 from 16 to 18 percent.

Vietinbank General Director Le Duc Tho said his bank’s credit growth quota setfor this year was recently adjusted to up to 18 per cent.

The extension was also reported for many other joint stock commercial banks.

OCB General Director Nguyen Dinh Tung said the SBV permitted his bank to have acredit growth quota of 22 percent, up from the earlier 14 percent.

Credit growth limits of VIB and TPBank are now 24 percent and 20 percent,respectively, up from 16 percent set by the central bank early this year.

According to the current regulation, SBV sets credit growth limits for eachcommercial bank depending on the bank’s health at the beginning of the year.This was done to control credit growth of the entire banking system and supportgovernment targets.

The SBV’s move to extend credit growth limits for commercial banks isunderstandable as lending of the entire banking system to date this year hasbeen positive.

According to a report from the National Financial Supervisory Commission(NFSC), credit growth of the banking system until the end of August wasestimated at 11.5 percent, compared with 10.2 percent in the same period of2016. It is forecast that the banking system will soon complete the 18 percentcredit growth target set at the beginning of the year.

Thanks to the improvement in lending, many banks by the end of the secondquarter had almost or even entirely used all credit room assigned by the SBVearly this year. The banks, therefore, had to ask the SBV to adjust creditgrowth upwards to have more room to meet rising capital demand during the peakbusiness season at the end of the year.

The Government also recently requested SBV to continue the monetary policy inthe direction of lowering lending rates, at the same time raising outstandingcredit to 21-22 per cent in 2017, based on credit quality and macro stability.

Together with the extension approval, SBV also instructed commercial banks toconduct scrutiny to ensure bank capital went to effective sectors, avoidingnon-performing loans.

SBV noted that it is ready to supply capital to the economy; however, the termsof lending will remain strict, in accordance with legal regulations andprocedures.

According to Tran Dinh Thien, Director of the Vietnam Economics Institute,raising the credit growth target to 22 percent will enable banks to have moreroom to expand lending at the end of the year.

However, it should be calculated with extreme caution, he said, adding that itwould be very risky if credit did not flow into production and business butinto sensitive business sectors, such as real estate and securities, especiallyat this time when the real estate and securities markets were warming up.

On the other hand, he warned that if the money continues to be injected withoutany positive impact on economic growth, inflation would surge.

As for liquidity of the banking system in the remaining months of the year whencapital demand often rises sharply, Bao Viet Securities Company’s analystsforecast that the liquidity of the system may encounter difficulty at somepoint, especially during the peak period of payment demand at the end of thefourth quarter of the year.

“However, in general, we assess that this risk is not too large and mainlytemporary,” the analysts stated.-VNA