The State Bank of Vietnam, in an effort to strictly control credit growth in the second half of the year, will take unscheduled inspection tours to banks that are pouring money into the real estate sector.

SBV has instructed banks to tighten control over real estate credit

Real estate, securities and transport BOT/BT projects are listed as risky sectors to which commercial banks are not encouraged to provide loans.

An SBV report showed that as of June 2018, outstanding loans to the real estate sector had increased by 2.19 percent compared with the same period last year, a growth rate which was in line with the central bank’s policy on tightening disbursement for risky business fields.

The recent moves by SBV all show that it is continuing to tighten credit flow into non-production fields. 

The watchdog agency is supervising capital flow into real estate. It decided to lower the proportion of short-term capital that commercial banks can use for long-term lending from 50 percent in early 2018 to 40 percent by early 2019 as stipulated in Circular 19 which took effect in February 2018.

Vo Tri Thanh, a member of the PM’s Economic Advisory Team, commented that as real estate credit accounted for 50 percent of total outstanding loans in H1, warning of the risks in providing loans to the real estate sector is a necessity.

Nguyen Tri Hieu, a banking expert, also thinks the central bank took the right move when warning banks of the high risks. Some banks, in an attempt to obtain high growth rates, are taking risks pouring money into real estate and securities, fields where there are uncertainties.

However, he said, before the inspections, SBV needs to clarify the concept of ‘providing loans to the real estate sector’. 

Real estate credit comprises different types of loans, including loans to fund house purchases and upgrading, real estate trading and real estate development. The loans to fund house purchases should be ‘consumer loans’, because they do not fund real estate trading.

In addition, Hieu said it is necessary to set limits for real estate credit. The banks which have outstanding real estate loans exceeding the limit will be inspected. If limits are not set, it will be unclear which banks ‘pour much money into real estate’.

Bui Quang Tin, a respected economist, said the inspections will help drive capital flow to the production sector which generates substantial growth value.

He noted that the scale of real estate credit may be higher than reported, because many loan items are listed as ‘consumer credit’. 

Source: VietNamNet