Hanoi (VNA) - Credit growth rate in the first eightmonths of 2017 has been estimated at 11.5 percent compared to the end of 2016,the National Financial Supervisory Commission (NFSC) reported.

As per the report, this figure is 1.3 percentage points higherthan the first eight months of 2016.

Short-term loans rose by 14.1 percent, accounting for 45.9 percentof total outstanding loans, while medium- and long-term lending grew by 8.8 percent,making up 54.1 percent, the NFSC report said.

The proportion of credit in VND in totaloutstanding loans rose by 11 percentage points to 91 percent. Notably, thecredit in foreign currency jumped by 11.5 percent compared to the same periodlast year. In 2016, the growth rate of foreign currency credits in the firsteight months was only 1.7 percent.

From January to August, the banking system’s deposit growth ratewas 9 percent; the figure in the corresponding period last year was 11.4 percent.

In terms of interest rates, the State Bank of Vietnam (SBV) saidthe average interest rates for short-term loans stood at 6.8 to 9 percent peryear, and for medium- and long-term loans at 9.3 to 11 percent.

Lawyer Bui Quang Tin, CEO of BizLight Business School, said thereare several factors that could help reduce interest rates or stabilise them inthe coming months. One factor is abundant liquidity in commercial banks, whichcould help satisfy the spike in credit demand in the last quarter of the year.

Also, the central bank has been continuously buying the US dollarto increase the foreign reserve; inflation is being controlled actively; andinter-bank interest rates have dropped to the lowest level since the beginningof 2017, Tin said.

However, financial and banking expert Nguyen Tri Hieu saidreducing interest rates by a further 0.5 percentage points is only feasible ifthe SBV increases buying bonds from commercial banks to supply more money tothe market. Since the beginning of the year, credit growth has been higher thandeposit growth, so without the SBV’s support, commercial banks would probablyhave to increase deposit interest rates to raise more capital.

Hieu warned that bond buying, however, might push up inflation.

He also stressed the importance of settling bad debts to furtherreduce lending interest rates, as currently, banks have to set aside largeprovisions for bad debts, which raises their costs.

The annual interest rates for deposits ranging from one to belowsix months averaged at 4.5 to 5.4 percent; those with terms between six and 12months at 5.4 to 6.5 percent, and for over 12 months at 6.4 to 7.2 percent.

The total post-tax profit of credit institutions in the first sevenmonths of 2017 touched 41 trillion VND (1.8 billion USD), a 60 percent surge onthe same period last year, mostly thanks to lending and services provisionactivities.

As of June 30, bad debts of credit institutions amounted to 157trillion VND, a 21.5 percent rise compared to the end of 2016, accounting for2.9 percent of total outstanding loans.-VNA