Major Vietnamese banks have begun cutting lending rates after directions from the government and the State Bank of Vietnam.
Agribank said it would launch a programme on October 19 to cut lending rates by up to 2% a year from normal rates. It will focus on priority sectors and customers in production and business. The bank said the measure should reduce funding costs and help companies and individuals maintain and expand their activities.
Agribank is the latest bank to announce that it is following directions from the government, the prime minister and the State Bank to stabilise and lower lending rates.
A day earlier, BIDV announced a preferential credit programme with rates starting at 6% a year. The reduction from normal rates can reach 2 percentage points. The programme applies to short-term loans in Vietnamese dong and depends on the loan term, sector and compliance with lending conditions.
On October 17, Vietcombank chairman Nguyen Thanh Tung said the bank would cut lending rates by at least 2% a year through the end of the year to help companies access capital.
After the deputy prime minister called for lending rates to be reduced by 1.5–2% for production, business and priority sectors, the State Bank also told lenders to direct resources toward cutting costs, share profits with borrowers and reduce the overall lending-rate level.
For deposits, banks must initially reduce listed rates for terms of six months or more by at least 0.5 percentage points. The State Bank also warned against competing to raise deposit rates in a way that could destabilise the money market.
Economist Nguyen Duy Quang of the University of Economics and Finance in Ho Chi Minh City said that genuine rate cuts would require banks to continue digitising processes, streamline their structures and improve operating efficiency. This would allow them to reduce lending margins without compromising financial safety.
He said banks should also increase the share of long-term funding, complete the restructuring of their assets and liabilities, and use State Bank refinancing programmes for priority sectors. These steps would create conditions for lower rates for targeted customers.
“The State Bank must closely monitor implementation and strictly penalise banks that do not lower rates for priority sectors. It should also publish rate tables to reduce the gap between large and small banks and increase pressure for self-regulation in the industry,” Quang said.
According to a report by the Vietnam Banks Association, short-term interbank rates have cooled, but long-term funding remains expensive. As of September 20, the average rate on new deposit transactions was 6.38% a year, 1.15 percentage points higher than at the end of last year.
In August, average Vietnamese-dong deposit rates at domestic commercial banks were 6.5–8% a year for terms of six to 12 months and 7.2–8.1% for terms longer than 24 months. Average lending rates were 8.4–10.7% a year, while short-term lending rates for priority sectors were about 4%.
The rise in deposit rates was explained by banks’ efforts to attract household funds as deposits grew more slowly than lending. Association data showed that by the end of the second quarter, loans at 26 listed banks had grown 9% from the start of the year, while customer deposits rose 5.5%. This pushed the average cost of funds to 4.8%, up 106 basis points from a year earlier.
By September 28, funds raised by credit institutions had grown 9.78% from the end of last year, but still lagged well behind credit growth.
To make lower rates available to small businesses, manufacturers and exporters, Quang proposed assessing repayment capacity through operating cash flow rather than collateral alone. He cited data on goods flows, electronic-invoice transactions and export orders as possible additional inputs.
He also proposed more flexible credit criteria for small and exporting companies and expanding the size and coverage of the Credit Guarantee Fund and export credit insurance. In his view, this would reduce bank risks and improve small and medium-sized companies’ access to finance.
Quang said the state budget and interest-subsidy funds could strengthen links between banks, small and medium-sized businesses and industry associations. He cited lending models for this business segment that have worked successfully in South Korea and Japan.
Sources: Dân Trí
