Hanoi (VNS/VNA) - The whole banking industry must implement effectivemonetary and credit policies to contribute to developing production andbusiness and support the recovery of the economy, Deputy Prime Minister Le MinhKhai has said.

Duringa conference of the banking industry in Hanoi earlier this week, Khai said theState Bank of Vietnam (SBV) needs to further reduce lending interest rates,especially for priority industries and sectors, besides improving creditquality and boosting up lending to production, business and infrastructureprojects.

Itis also necessary to promote the development of consumer finance to contributeto reducing loan sharks and crimes on lending apps, he said.

Besides,the SBV must closely direct banks to have plans and solutions to handle andkeep their bad debt ratios of the banking system under control, which will helpensure the banking system operates safely, healthily and sustainably, Khainoted.

Accordingto the SBV’s Deputy Governor Dao Minh Tu, the spread of the Omicron variant hascaused difficulty to forecast the global economic outlook and inflation in2022, thereby posing many challenges for the Vietnamese banking industry.

Therefore,he forecast, the SBV’s monetary policy management next year will be greatlyinfluenced by inflationary pressure, especially in the context that a loosemonetary policy has lasted for the past few years.

Thebanking industry next year will also suffer a stronger impact on rising risksof debt recovery. If including debts, which had repayment terms restructured orinterest rates reduced according to the SBV’s Circular 01/2020/TT-NHNN, the baddebt ratio of the banking system is about 7.31 per cent to date, Tu said.

Hewas also concerned if there is no timely and effective support from fiscalpolicy, an excessive expansion of credit size and preferential interest rateprogrammes can cause difficulties not only for the SBV’s monetary policymanagement but also the country’s strategy on improving the financial strengthof banks.

Currentpolicies on restructuring and delaying the debt payment time are a temporaryand necessary solution in the short term, but extending the restructuring timewill be risky for the banking system in the medium term, Tu explained, addingthe implementation of many credit packages with different preferential interestrates will also distort the interest rate and credit markets.

Asfor the capital hike of banks, Tu said it is necessary to increase chartercapital for State-owned banks to help them have enough capital to implement theGovernment’s many preferential credit programmes; lend to large and nationalkey infrastructure projects in electricity, build-operate-transfer (BOT),transport, airports and, seaports; or increase loans for the Government’spriority fields such as agriculture and rural areas, import-export, small andmedium-sized enterprises.

Atthe conference, Chairman of the Joint Stock Commercial Bank for Investment andDevelopment of Vietnam (BIDV) Phan Duc Tu also suggested relevant authoritiesto create conditions for banks to increase their charter capital and raise thecapital adequacy ratio./.