Real estate bad debt is nearly 37,000 billion VND

Credit institutions with safer and healthier operations will be considered by the State Bank for higher credit growth targets.

Governor of the State Bank Nguyen Thi Hong sent to National Assembly deputies a report on a number of contents related to the group of questions at the 3rd Session of the 15th National Assembly.

94% of real estate debt is medium and long term

Regarding real estate credit, according to the State Bank's report, as of the end of April, the total outstanding debt for the real estate sector of credit institutions reached more than VND 2,288 trillion, an increase of 10.19% compared to the end of 2021 and accounting for 20.44% of the total outstanding debt of the economy. Of which, the bad debt ratio is 1.62% (equivalent to VND 37,000 billion).

Currently, about 94% of outstanding real estate loans are medium and long-term loans (accounting for 10% - 25%), while banks' mobilized capital is mainly short-term. The difference in terms and interest rates between capital sources and loans for this sector is a big risk for banks.

Governor Nguyen Thi Hong said that real estate investment and business is one of the risky areas for banking activities, requiring control solutions. Accordingly, the State Bank has completed the legal framework through legal documents on limits and safety ratios in banking activities.

In addition, closely monitor the growth rate of outstanding loans and credit quality in the securities and real estate sectors to promptly detect signs of potential risks and take appropriate measures, contributing to ensuring the safety of the credit institution system.

“Strengthen inspection and examination work, focus on and concentrate on checking credit granting records in the real estate sector of banks. From there, detect problems, shortcomings, and violations in credit granting activities to promptly handle and make specific recommendations to limit risks of credit institutions in credit granting activities in general and real estate in particular,” said the Governor of the State Bank.

However, the State Bank also stated that the strong fluctuations in the real estate market, the situation of inflated prices causing virtual real estate fever, land auctions at unusually high prices... have affected credit granting and valuation of collateral assets of credit institutions.

Although the credit situation as well as credit quality for the real estate sector are still being controlled by the State Bank to limit the impact of the real estate market on the macro-economy and currency, the Governor said that there should be comprehensive and synchronous solutions with the coordination of relevant ministries, departments and branches to improve and build a safe and sustainable real estate market.

In the coming time, Ms. Hong said that the State Bank will continue to direct credit institutions to grow credit safely and effectively. Strictly control credit for areas with potential risks, including real estate investment and trading. In addition, create conditions for organizations and individuals to access credit capital to buy houses, invest in self-use housing, especially social housing, housing for workers, and low-cost commercial housing.

Tight control of credit in risky areas

Also according to the State Bank's report, by May 31, credit increased by 8.04% compared to the end of 2021, and increased by 16.94% over the same period last year.

Of which, 4/5 priority sectors had higher growth rates than the same period last year and 3/5 priority sectors had higher growth rates than the general credit growth rate; credit for potentially risky sectors was controlled.

Explaining the mechanism for granting credit limits to banks, the Governor said that based on the socio-economic targets of GDP growth and inflation, the State Bank annually sets the credit growth target for the entire year for the entire credit institution system and makes appropriate adjustments to suit the needs and capital absorption capacity of the economy.

"This ensures capital supply for economic development but is also cautious with inflation risks and bad debt risks," said Ms. Hong.

According to the Governor, the State Bank will announce credit growth targets for banks, based on the financial situation, governance and healthy credit expansion capacity of each credit institution.

This unit also directed credit institutions to increase credit growth safely and effectively, focusing on production and business sectors and priority areas, creating favorable conditions for people and businesses to access bank credit capital.

Governor Nguyen Thi Hong affirmed that the announcement of credit growth targets for credit institutions is carried out according to the principle: Credit institutions with safer and healthier operations will be considered by the State Bank for higher credit growth targets, thereby promoting credit institutions to improve their management and operation capacity, enhance quality, operational efficiency and operational safety indicators.

In addition, the State Bank also considers a number of factors such as the level of interest rates for mobilization and lending, the proportion of investment in the real estate sector, the agricultural and rural sectors, etc. to ensure proper implementation of the Government and the State Bank's policy on focusing credit on the production and business sector, strictly controlling credit in potentially risky sectors, and continuing to reduce the lending interest rate level.

According to the report, in 2022, credit growth pressure will be high due to the resonance of many factors, such as slow disbursement of public investment, causing capital for economic recovery to depend heavily on bank credit. In addition, the implementation of the VND40,000 billion interest rate support package in 2022-2023 in the context of increasing inflationary pressure and a high credit-to-GDP ratio will cause many challenges for credit management.

According to the agenda of the 3rd session, from this afternoon, June 7 to June 9, the National Assembly will begin a 2.5-day question-and-answer session with the Ministers: Ministry of Agriculture and Rural Development, Ministry of Finance, Ministry of Transport and Governor of the State Bank.

According to VNA