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Agriculture, rural development get loan priority

FRIday - 25/11/2011 14:59
Agriculture and rural development would be given priority to access bank loans while tightened monetary policies are kept in place for the non-production sector. The Governor of the State Bank of Viet Nam (SBV), Nguyen Van Binh, spoke to the local press about the bank's monetary policies for the short-term future.




SBV Governor Nguyen Van Binh

SBV Governor Nguyen Van Binh

What will SBV do during the remainder of the year in regards to monetary policies?

As of November 21, the entire banking system has seen a credit growth of over 10 per cent in comparison with the end of last year.

For the whole year, SBV and the banking system aim at reaching a credit growth of 15 per cent, making the remainder of the year an important step for next year.

As credit growth this year is estimated at 15 per cent, which is lower than planned, what will be the SBV's monetary policies for next year ? Which sectors will get priority to access bank loans?

According to the 2012 plan for socio-economic development approved by the National Assembly, the banking system's credit growth is set to be restrained from 15 to 17 per cent.

Therefore, the SBV will guide credit institutions and banks to stick to the plan while aiming to help the country reach a GDP growth rate from 6 to 6.5 per cent while curbing inflation at 10 per cent in the coming year.

Specifically, SBV has selected several sectors which would be given priority to access bank loans next year.

Loans would be earmarked for agriculture and rural development projects, especially for those aimed at recovering production in provinces hit by recent storms and flooding.

In addition, lending for agriculture next year will also focus on helping build rice, agricultural and seafood processing plants.

In particular, production of commodities for exports, support industry and small- and medium- sized enterprises are also subject to the incentives.

Meanwhile, the SBV will give more specific instructions for commercial banks regarding lending to non-production sectors.

Lending loans to agriculture and rural areas may trigger high service costs on small-sized loans. Does the SBV have any policy to encourage commercial banks or support them in this area?

In fact, such aforementioned areas that would be given priority to receive bank loans do not have high risks but require higher service fees due to small-sized loans. Also, in most cases, bank staff must deliver loans to farmers or households in rural or mountainous areas which includes higher service costs.

Due to those reasons, several commercial banks have hesitated to lend loans for farmers and households in remote areas.

In reality, lending loans for agriculture and rural development is low risk.

If commercial banks want to serve such customers better and reduce lending interest rates, they must reserve sufficient capital and cover service fees.

On the other hand, the SBV will issue proper monetary policies to help banks with a majority of their outstanding loans reserved for agriculture and rural development projects. In particular, the central bank might give those banks incentives in regards to their compulsory reserves or even refinance the banks.

SBV will assign the Bank for Agriculture and Rural Development of Viet Nam as the major bank to implement these tasks. The bank will be required to lend up to 80 per cent of its loans to agriculture and rural development projects in 2012.

At the moment, bank deposit and lending interest rates are restrained at 14 per cent and 17 per cent per year, respectively. Do you think these rates should fall further?

This year, the country has made a huge effort to curb inflation. Since August, we have seen a slower growth rate for inflation. This is a good sign.

However, Viet Nam's inflation is still high. From now until the end of the year, Viet Nam is trying to curb inflation at 18 to 18.5 per cent. Therefore, since August, the SBV has required that all commercial banks reduce their deposit interest rates to 14 per cent and lending interest rates from 16 to 18 per cent per year.

Continuing to lower interest rates is a critical demand for the economy, however, it should be carried out in the context of further curbing inflation.

With such positive signs of slower paced inflation during the past months, we hope that the consumer price index would be curbed to a low level, at under 1 per cent per month during the next two months of the year. —VNS


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