Banks urged to further cut lending rates
The central bank will continue instructing banks to reduce interest rates, share profits with businesses, and undertake debt restructuring with a greater sense of urgency.
Commercial banks must continue optimizing their operational costs while reducing lending rates for both businesses and customers.
Deputy Prime Minister Le Minh Khai at the meeting. Photo: Nhat Bac
Deputy Prime Minister Le Minh Khai stressed the view during a Government meeting on May 24, discussing solutions to help businesses better access credit andlower interest rates.
During the meeting, Khai emphasized the importance of the State Bank of Vietnam (SBV) carefully analyzing factors about credit issuance and the economy's capacity to absorb capital.
Such a move will serve as the foundation for banks to devise strategies aimed at reducing costs and lowering both capital mobilizing and lending interest rates, he noted.
“Reasonable capital mobilizing rate will be key to help lower interest rates. A strong business community remains essential for banking development,” said Khai.
While emphasizing the alignment of goals between banks and businesses, the Deputy Prime Minister also stressed the significant role of banks as crucial institutions responsible for ensuring the economy’s stability.
Responding to the Government's request, SBV’s Deputy Governor Dao Minh Tu stated that the central bank would continue instructing banks to reduce interest rates, share profits with businesses, and undertake debt restructuring with a greater sense of urgency.
Representatives from the banking sector also expressed their agreement to further reduce both capital mobilization and interest rates.
They also pledged to actively engage with businesses and longstanding customers to alleviate challenges, stressing the symbiotic relationship between businesses' survival and banks' stability.
Customers at an SHB-Hanoi branch. Photo: The Hanoi Times
A report issued by the SBV revealed, as of May 16, the total outstanding loans in the entire economy exceeded VND12,250 trillion (US$521.7 billion, marking a growth rate of over 2.7% compared to the end of the previous year and a 9.3% increase from the same period in 2022.
The central bank acknowledged that while liquidity within the system remained abundant, credit expansion was lower than the previous year's corresponding period. This trend can be attributed to the limited absorbing capacity of businesses, prevailing economic difficulties, and specific customer groups facing challenges in meeting loan requirements.
Over the past three months, the SBV has implemented three interest rate cuts. Most recently, on May 23, the central bank reduced the operating interest rate by 0.5 percentage points and lowered the ceiling deposit interest rate. This serves as a clear indication for banks to reduce their lending rates.
During the meeting, Deputy Minister of Planning and Investment Tran Quoc Phuong highlighted the challenges faced by many businesses, particularly small and medium enterprises, in accessing capital due to stringent loan requirements.
He suggested that banks devise suitable solutions to enable businesses to secure funding, thereby helping them overcome this challenging period.
In response, Deputy Governor Dao Minh Tu noted that the central bank would amend Circular 39/2016 regarding loans from credit institutions and foreign bank branches to customers. "The amendments aim to create a more flexible and open framework without compromising standards."