State Bank of Vietnam Governor Nguyen Van Giau affirmed central bank policy requiring commercial banks to maintain credit growth at 20 percent or less this year, in a meeting with commercial bank representatives held here on Friday.

Staff work at Southern Bank in Binh Thanh District, HCM City

Giau said the central bank would require commercial banks violating the policy to double capital reserve ratios, and would place other restrictions on their operations.

On average systemwide so far this year, credit has grown by 6.92 percent, according to State Bank figures.

However, among banks from the southern provinces represented at the meeting, at least 10 have already reached their 20-per-cent credit growth target, and two have already surpassed it.

These banks requested the State Bank review its policy, urging the central bank not to apply a fixed figure for all banks. They argued that each bank had its own credit growth plan, with different development goals at different times of the year, depending on borrowers\' seasonal business operations.

The banks complained that they were already operating under severe restructuring this year, after many had been forced to double or triple their charter capital to at least VND3 trillion (USD145.6 million). They were therefore under pressure to increase their profits and ensure shareholder benefits. Most banks depend on lending for 80-90 percent of earnings have considered stronger credit growth as a traditional way to help them meet revenue targets.

These were typically short-term loans made against collateral assets, with high liquidity, they explained, not long-term real estate loans, they said. Real estate loans, which account for 80 percent of lending to the non-manufacturing sector, had terms averaging three to five years or more, and many of these were made for high-end residential housing, currently a hard sell in the stagnant real estate market, bankers said. Meanwhile, many outstanding real estate borrowers had fallen in arrears, making it difficult for banks to reduce the share of loans they make to the non-manufacturing sector.

The State Bank has also asked commercial banks to lower interest rates and avoid engaging in unhealthy competition.

Giau is meeting this week with representatives of banks operating in the northern provinces.