Credit restricted for borrowers in real estate, securities

Local banks are required to reduce loans to businesses in the non-manufacturing sectors, particularly real estate and securities.

A directive dated March 1, given by the State Bank of Vietnam, included this requirement. The directive follows the Government’s resolution No. 11, issued on February 24, which is aimed at tightening monetary policies to curb inflation.

By June 30 this year, loans for businesses in the non-manufacturing sectors must be cut to 22% of the banks’ total outstanding loans, and by the end of the year, the percentage must be dropped to 16%, the SBV said.

Instead, more loans will go to the manufacturing sector, agriculture, export, supporting industries and small and medium enterprises.

Any bank which fails to follow the new restrictions will have a compulsory reserve ratio that is double what is currently required. They will also face restrictions in their operations in the second half of 2011 as well as the next year.

The SBV also requested local lenders to restrict foreign currency loans to firms that import non-essential goods. They will also be required to limit both deposits and lending of gold.

Under the Government’s resolution, the national credit growth will be lowered to below 20% and, money supply by between 15% and 16% this year.

This year, the Vietnamese Government targets has set a cap of overspending to below 5% of the GDP.