Vietnam banks ordered to prioritise industrial, farm lending

Vietnam's commercial banks will double compulsory reserves if they fail to reduce the proportion of outstanding loans made to the non – manufacturing sector. The State Bank of Viet Nam ordered it reduced to 22 per cent by June and 16 per cent by the end of the year.

The measure would prioritise lending for manufacturing, agricultural production, rural development, small – and medium-sized enterprises, support industries and exporters, while effectively limiting new consumer loans or lending for real estate or securities investment.

The State Bank yesterday also reminded commercial banks to target overall credit growth of less than 20 per cent this year, requiring any banks unable to meet such a target to report to the central bank for evaluation of the need for a higher target.

The State Bank has also ordered commercial banks to strengthen internal auditing, add to their risk provision funds, monitor bad debt ratios, and avoid making loan swaps to cover bad debts.

Other measures the Government has ordered to reduce the growth in the money supply and ease inflationary pressures include stabilisation of the foreign exchange and gold markets and a reduction in dollarisation of the economy by restricting the quotation of prices and trading goods in US dollars.