The trend of reducing input interest rates continues to take place in many commercial banks. Recently, all four state-owned commercial banks (SOCBs), including Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam Bank for Agriculture and Rural Development (Agribank), Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) and Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), have decreased by 0.1-0.2 percentage points in term deposit interest rates, of which short term rates are 1-2 points. the current month is only 3.5%/ year.
At many other joint stock commercial banks, the wave of reducing input interest rates has happened recently. Currently, the lowest deposit interest rate on the short-term market recorded at Vietnam Technological and Commercial Joint-Stock Bank (Techcombank) is only 3.15%/ year for 1-month term, customers under 50 years old deposit under one billion dong…
The August market strategy report of SSI Securities Company revealed that the deposit interest rates for terms were adjusted down from 0.5 to 0.8 percentage points compared to the previous month. Banking system liquidity is still in redundant state with very low interbank interest rates, credit growth is lower than the growth rate of capital mobilisation.
According to the State Bank of Vietnam (SBV), as of the end of July, capital mobilisation of the credit institutions system was 5.71%, while credit growth was only 4.03%. This reflects the capital absorption of enterprises, economy is low-growth in the context of complicated Covid-19 pandemic. Therefore, the reduction of input interest rates is the basis for further lowering interest rates.
Le Duc Tho, Chair of the Board of directors of VietinBank, said that the falling interest rate was in line with the macroeconomic developments of current market, according to supply and demand contributed to the monetary policy adjustment. “Last period, VietinBank has supported businesses and individual customers affected by Covid-19 pandemic by reducing interest rates, reducing fees, cutting operating costs and profits. Actually, reducing interest rates contribute to reduce cost of capital for businesses, SOCBs have strongly joined. Currently, we are continuing to deploy synchronously a number of products, services and financial solutions to support customers to restore productions and business activities, overcome a pandemic ” Le Duc Tho said.
In the first half of 2020, VietinBank has restructured the debt payment terms, interest exemption and reduction, kept the debt group according to Circular 01 and SBV’s guiding documents. For customers affected by Covid-19, VietinBank has supported to lower interest rates up to two percent per year, an average of 0.6 percent per year for nearly 9,000 customers with outstanding loans exempted from interest rates to more than 242 trillion dong…
Similarly, Vietnam International Bank (VIB) continues to apply an automatic interest rate reduction policy of 0.5-2 percentage points for existing businesses to borrow medium and long-term without request support or difficult situation proof. VIB also studies other support packages depending on the disease development.
At Nam A Commercial Joint Stock Bank (Nam A Bank), since the beginning of the year until now, there have been 5 times to reduce deposit rates to reduce lending rates to support individuals and businesses affected by Covid 19. The total credit balance that this bank has implemented to reduce interest rates, debt structure, and concessional loans up to more than 10 trillion in the first half of the year and expected to support customers by the end of the year with a total outstanding loan of 20 trillion dong. “We will reduce operating costs, deploy new programmes to support capital and interest rates for customers to stabilise business in the last months of the year. This activity may affect the profitability of banks in the next quarters, but still drastically deploy to work with customers through this difficult period ” a representative of Nam A Bank said.
Expand the government guarantee programme
In the document on the implementation tasks in the last months of the year of the banking industry, Governor Le Minh Hung requested the subordinate organisation to urgently consider adjusting credit growth targets for 2020 for good credit institutions, able to expand credit but not increase deposit and lending interest rates. At the same time, the SBV urgently completes the amendment and supplementation of Circular 01 on loan interest exemption and reduction, restructuring debt in a way that is appropriate to reality and facilitating enterprises and credit institutions to overcome challenges and restore economic.
In particular, commercial banks are also required to strictly comply with the instructions of the government, the prime minister and SBV on reducing operating costs, salary, bonuses, and profits to continue lowering interest rates. With existing loans and new loans, supporting and accompanying businesses, people contribute to the recovery of production and business after the epidemic.
Ngo Quang Trung, general director of Ban Viet Commercial Joint Stock Bank, commented that in the context of difficult situation, capital absorption of enterprises is not high, so it is difficult for credit growth to accelerate. Therefore, the interest rate level can also be reduced further depending on customer segments and industries.
In order to response with the Covid-19 pandemic at this time, each commercial bank needs to simultaneously work with its customers with the tools and regulations issued by the SBV; closely manage costs and labour productivity; cautious in investment, lending in nonessential industries…
From the expert’s perspective, Dr Tran Hung Son, deputy director of the Banking Technology Research and Development Institute, VNU HCM City, analysed small and medium-sized enterprises, households, and consumers who borrowed money. major injury due to the Covid-19 epidemic and the ability to tolerate damage much less than that of large enterprises. This is also a group of difficult access to ordinary bank credit and even more difficult when accessing credit support packages.
At this point, the government needs to shift creditors’ risks on their side because when seeing uncertainty, banks will limit lending. Therefore, in order to clear the capital flow to businesses that are subject to support, the government needs to accept to absorb this risk. The government can do it through state-owned financial institutions or expand state credit guarantee programmes to private banks, but still on a co-sharing mechanism to limit risks. ethics in credit allocation. The implementation of state credit guarantees here will play the same role as the deposit guarantee and the final lender.
