Banks plan to expand credit in the second half by slashing interest rates and offering preferential loans to companies.

But some big banks, who have been assigned a growth cap of up to 17 percent, have already admitted that the growth target would be impossible to achieve this year, despite the fact that credit growth has been improved recently due to interest reduction to under 14 percent per annual.

"We hope to expand credit by 12 percent this year, but it will be really hard since we have only achieved 3.6 percent growth in the first six months despite reducing interest rate eight times," Nguyen Hoa Binh, chairman of the Bank for Foreign Trade of Vietnam (Vietcombank) was quoted as saying by Sai Gon Giai Phong (Liberated Sai Gon) newspaper.

"The bank has a target of 17 percent. It has abundant funds and would like to lend more, but has to be careful and cannot dilute standards," Binh said.

The Asia Commercial Bank is attracting more customers as industries like rubber and garment have to import their normal second-half quota of raw materials, but admitted 17 percent credit growth was hard to achieve.

"We are choosing some real estate projects in good locations to provide loans," Do Minh Toan, the bank's deputy general director, said.

The Eastern Asia Commercial Bank is also in negotiations with housing developers to lend at 12 percent interest, but requires them to first reduce their prices.

The Export-Import Bank (Eximbank) has earmarked 5 trillion VND (238 million USD) for lending at 10 percent. The rate is ostensibly low, but still higher than the inter-bank interest rate of 4 percent while other asset classes like stocks are also doing badly.

Helping companies increase sales would make them confident about borrowing more money for production, said Chau Van La, chairman of the Tan Binh District People's Committee, asked.

Truong Van Phuoc, general director of Eximbank, concurred, saying the Government should consider policies to stimulate consumption without sparking off inflation again.

"The experience of Japan shows that too strong efforts to control inflation could cause deflation. Even 0 percent interest rate cannot revive consumption then."

Experts predict fierce competition among banks to attract and keep good customers this year./.