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Letter from Hanoi: Vietnam banks under pressure

Special from our editorial partner VietNamNet

(Editor's note: this story was provided by our editorial partner VietNamNet)

VietNamNet Bridge – Commercial banks, luckily enough, could raise their chartered capital before the deadline. However, a new problem has arisen that they do not know what to do with the additional capital.

When planning to raise chartered capital, banks said that they would use the capital to improve material facilities, expand the networks and expand credit. However, the economic difficulties have put pressure on banks in their plan on using the additional capital.

The capital increase proves to be the good opportunity for banks to expand credit, which explains why many banks have set high targets for credit growth this year. However, in the context of the economic difficulties, it would be not so easy to push up loaning.

In the first two months of the year, though the lending interest rats have dropped significantly to 10.5 percent at maximum, and the Government has launched the interest rate subsidy program, banks still complain that the outstanding loans have still been growing slowly.

According to the HCM City Statistics Office, by the end of February 2009, local banks had mobilized VND 587 trillion in capital, an increase of 20.2 percent over the same period of 2008, while the total outstanding loans had reached VND 501 trillion, up by 13.2 percent over the same period of 2008, and by 0.7 percent only over the previous month.