March 20, 2013 / 2:57 AM / 5 years ago

Vietnam loans shrink 0.28 pct in Feb from end-2012

HANOI, March 20 (Reuters) - Loans in Vietnam’s banking system fell 0.28 percent in February from the end of last year, the government said, underlining the difficulties banks continue to face to boost lending despite falling interest rates.

The shrinking credit growth was attributed to a drop in loans in foreign currencies while those in dong, the local unit, rose 0.71 percent from the end of 2012.

Deposits in banks increased 2 percent in the month from the end of last year, the government said in a statement late on Tuesday, quoting data from the central bank.

The central bank lowered key policy rates six times last year and the government has pledged further cuts, but credit growth has been slow amid an economic slowdown.

Banks have, in addition, tightened their lending rules for fear of non-performing loans, estimated at 6 percent in February. Businesses saddled with unsold inventory have refrained from taking new loans.

Loans in the banking system rose 8.91 percent in 2012, versus an average of 30 percent in the 2006-2011 period, and below a projected growth of 12 percent, the central bank has said.

It plans credit growth of 12 percent again this year.

Reporting by Hanoi Newsroom; Editing by Sanjeev Miglani

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