Vietnam: Banking sector to continue reducing lending rates by 0.5%

The Hanoitimes – The banking sector has committed to the Prime Minister for an additional reduction of 0.5% in lending rates as of January 9. As such, Vietcombank is the first bank realizing this commitment.
The Prime Minister Nguyen Xuan Phuc highly regarded the State Bank of Vietnam’s (SBV) effort in macro economic management in 2017 at the meeting on the banking mission in 2018. Firstly, the SBV has actively and flexibly managed monetary policies, taking the inflation rate under 3.53%, which is lower than original target set by the National Assembly. This favorable condition has allowed the government to create rooms for improving effectiveness of fiscal policies. 

Secondly, the domestic foreign exchange market and the gold market have been kept in stable and in positive trends, creating favorable conditions to support export activities. “An efficient exchange rate policy is instrumental to bring the foreign exchange reserves to an all-time record high of US$53 billion, contributing to Vietnam’s improved credibility in global financial market, and building trust among foreign investors, organizations and individuals”, the Prime Minister said. 

The government is committed to protect legal rights and interests of depositors – the leader of the government added. Thirdly, the banking sector continues its role as the main supplier of capital to the economy, with the total credit balance as of the end of 2017 reached US$284 billion, an increase of 18% over the last year’s figure. With this being said, the banking sector has pumped an additional of US$52.5 billion to the economy in 2017. 

The policy on interest rates is being managed efficiently, as such, the lending rate in 2017 has been reduced from 0.5-1%, in turn relieves pressure on enterprises in business operation. Representatives of banks in the meeting have committed to reduce an additional of 0.5%. 

Fourthly, the restructuring process of credit institutions and tackling non performing loans (NPLs) in second phase (2016 – 2020) have been the priority of the banking sector. Preliminary results from these efforts have helped maintaining the stability of the banking system, and minimizing the risks in financial sector; gradually improving performances of weak credit institutions; creating conditions for commercial banks to improve their competitiveness.

Fifthly, the administrative reform and improving business environment in the banking sector continue to be the spotlight, as Vietnam has climbed 3 ranks to be the fourth in ASEAN in the Credit Access Index. 2017 is also the second consecutive year that the banking sector topped government agencies in implementing administrative reform.

The Prime Minister, however, requested the banking sector to to continue pushing credit on priority sectors; the progress in dealing with NPLs and restructuring credit institutions is slower than expected. 

Vietcombank is the first commercial bank issuing a specific roadmap on the reduction of lending rate. Specifically, short term loan in VND for priority sectors will be reduced to the maximum lending rate of 6% per year. For current existing loan of 6.5% per year, Vietcombank will reduce its rate to 6% per year.