Vietnam’s central bank raises credit growth quotas for lenders

Vietnam’s central bank has allowed credit institutions to expand their credit growth limits this year, allocating quotas based on each lender’s capacity, performance, and regulatory compliance.

The quota allocation will be carried out in a specific, transparent, and public manner, the State Bank of Vietnam (SBV) announced on Thursday.

System-wide credit rose 9.64% as of July 28 against end-2024, outpacing the same period in previous years.

The government aims to achieve a GDP growth rate of “at least 8%” this year, a target approved the parliament. In mid July, Prime Minister Pham Minh Chinh even made it clear that the economic expansion should be “about 8.3-8.5%”.

Exports, FDI, stimulation of domestic consumption, and heightened public investment are expected to be major driving forces of the growth.

The headquarters of the State Bank of Vietnam in Hanoi. Photo courtesy of the central bank.

Earlier this year, the SBV assigned credit growth quotas to lenders and has since “steered monetary policy proactively and flexibly, aligning closely with fiscal policy to foster economic growth while ensuring macroeconomic stability, inflation control, and major economic balance”.

Notably, the central bank said the quota expansion was its own initiative, and lenders were not required to submit written requests as in previous years.

The move comes amid calls from the government and business community to scrap the credit growth quota mechanism altogether – a long-standing administrative measure.

At a July 3 meeting between the government and 34 newly-formed provinces and cities following their mergers, Prime Minister Pham Minh Chinh instructed the central bank to urgently consider removing the administrative tool, and shift toward a market-based control mechanism.

The SBV asked credit institutions to ensure credit growth remains safe and efficient, with a focus on production, priority sectors, and key growth drivers.

Lenders must also tighten control over high-risk areas, strengthen credit appraisal and monitoring throughout the lending process, comply with safety ratio regulations, make adequate risk provisions, and proactively handle and limit the emergence of bad debts, it said.

The mechanism of setting credit growth quotas has been maintained by the SBV for over a decade to control lending quality and serve macroeconomic goals such as interest rates, money supply, and inflation.

However, in recent times, many experts have argued that this tool has become outdated and fostered an “ask-give” mechanism.

The central bank is currently implementing a roadmap to gradually reduce and ultimately eliminate the allocation of credit growth quotas for each bank.

Last year, the regulator removed credit growth “caps” for foreign bank branches. For the remaining credit institutions, it is reviewing and taking steps to gradually phase out this mechanism.

However, the SBV remains concerned that completely removing the annual credit growth quotas could lead to a renewed race among banks to raise deposit and lending interest rates and increase bad debt levels, as seen prior to 2011.

Going forward, the bank said it will continue to closely monitor domestic and international market developments, remain ready to provide liquidity support for credit institutions, and adopt appropriate policy measures as needed.

It targeted an annual credit growth of around 16% for the banking system in 2025.

In 2024, Vietnam’s credit growth reached 15.08%, with total credit balance of VND15,616 trillion ($596.05 billion) by the end of the year.