Central bank to control property loans

The central bank will control property loans this year, while bad debts remain an issue for the banking sector. - Illustrative image cafef.vn

State Bank of Viet Nam deputy governor Nguyen Phuoc Thanh said that although credits grew positively with the majority of loans poured into production and business activities last year, many banks pumped too much capital into the real estate market.

Xay Dung, a Ministry of Construction newspaper, reported that property loans grew by 18 per cent year-on-year last year, as commercial banks accelerated financing both property developers and homebuyers.

According to the central bank's credit department, outstanding loans in the real estate sector total about VND360 trillion (US$16 billion), a rise of 80 per cent from the figure recorded three years ago.

"What's worrying, many banks have ‘put all their eggs into one basket' – the realty sector. It is necessary to tightly monitor risks, or else bad debts in this area may soon rise again," Thanh said.

The deputy governor noted that bad debts remained an issue for the banking sector. He added that some banks were facing troubles with enterprises that asked for loan restructuring and lower interest rates to avoid bankruptcy.

The Viet Nam Institute for Economic and Policy Research under the University of Economics and Business said that rallies in the property market were positive signs for the the economy. But caution is needed to prevent "property bubbles" from occuring.

Minister of Construction Trinh Dinh Dung said recently that, at the moment, the property market did not have the conditions to form a bubble. "However, it cannot be ignored," he stressed.

In a resolution issued earlier this month on socio-economic in 2016, the Government asked the central bank to strictly control loans allocated in high-risk areas, including real estate.

This would be part of the central bank's policies to help the country control inflation, maintain macro-economic stability and accelerate economic growth.

Dung said the construction ministry would aim at enhancing the quality of property products in 2016, as the competitiveness of the construction sector remained low.

This was one among its efforts to boost the construction production value by 10 per cent against 2015.