Nguyen Van Binh, governor of the State Bank of Vietnam, said the banking system was projected to obtain a 5% rise in normal loans this year but if the money banks had used to buy the debt paper from the Government was included as a form of loan, their combined credit growth would be 10%.If it is true, this will be the first time banks’ government bond purchases are included to calculate credit growth.

Credit growth as of mid-October had reached 3.3%, which is expected to rise to 5% by the year’s end. Meanwhile, the banking system has bought over VND183 trillion worth of government bonds and government-guaranteed bonds in the year to date.

“The credit growth forecast at 5%, plus 5% of indirect investment in government bonds, will take the total credit growth in the banking sector this year to an estimated 10%,” Binh told a Q&A session at the National Assembly early this week.

Deputy Tran Du Lich asked the governor: “The credit growth target is 15-17%, so why did you say credit growth of 5% is fine?”

Binh replied: “Credit growth is not a macro-economic target. In 2011, credit growth stood at 14% but we could not buy government bonds, all funds of banks were focused on lending. Part of the funds this year have been used to buy government bonds and I think this looks reasonable to me.”

Last week, the Ministry of Finance informed the State Treasury had mobilized more than VND115.8 trillion from government bonds sales in the first ten months of the year, 96.56% of the plan for this year and 180.8% of the year-ago figure.

However, Governor Binh said banks had poured over VND183 trillion into government bonds. The gap between VND115.8 trillion and VND183 trillion was attributed to investment in bonds issued by Vietnam Development Bank (VDB) and bonds of local governments, said Do Ngoc Quynh, general secretary of the Vietnam Bond Market Association.

The Government bonds banks have bought are seen as a form of lending to the Government to fund State investment projects and contribute to economic growth, said Binh.

In fact, the money that banks spend to purchase government bonds cannot immediately flow into the economy as disbursement of proceeds from government bond sales is very slow. The current pace of disbursement is actually behind the year’s target.

There are now about 15 banks, mostly big local and foreign ones, actively involved in the primary government bond market.

Source: SaigonTimes