31st Sea Games - Vietnam 2021 Covid-19 Pandemic
Jul 12, 2021 / 15:12

Vietnam c.bank calls for lower interest rates in July

As the pandemic continues to persist, stronger measures are needed to restructure debts and lower interest rates for customers.

The State Bank of Vietnam (SBV), the country’s central bank, suggested the Vietnam Banks Association (VNBA) should reach an agreement with commercial banks and institutions in lowering interest rates in July.

 Customers at a SeABank branch in Hanoi. Photo: Tran Anh 

SBV’s Vice Governor Dao Minh Tu made the statement in a recent meeting discussing measures to support businesses and the national economy amid severe Covid-19 impacts.

According to Tu, in the past 18 months since the first Covid-19 outbreak in Vietnam, difficulties that the business community is facing is mounting, which has been reflected by a surge of 25% year-on-year in the number of enterprises temporarily suspending operation to 70,200 in the first six months, higher than the number of newly-formed enterprises at 67,100.

“This shows enterprises’ resilience is diminishing,” he noted.

In this situation, the banking sector has been seen as an active supporting channel for enterprises through debt payment restructuring, waiving and extending payment of interest rates, and providing new loans with preferential rates.

Tu, however, said as the pandemic continues to persist, stronger measures are required from banks in restructuring debts and providing lower interest rates for customers.

“Banks operation should balance two objectives of supporting businesses overcoming the pandemic and ensuring safety for the banking system in short-, mid-and long-term,” he added.

On this issue, banking expert Nguyen Tri Hieu pointed out the fact that while there has been a growing number of enterprises on the brink of bankruptcy, the banking sector posted strong profitability in the six-month period.

“One of the key reasons is that banks have not lowered interest rates in proportion with the fast-declining capital mobilizing rates,” he told The Hanoi Times.

“Banks face a dilemma of rising bad debts in case they extend debt payment or provide unsecured loans for enterprises,” Hieu stated, saying only those with a good credit score or good financial situation can have access to loans.

Hieu proposed the SBV to set up loan syndication worth VND300 trillion (US$13 billion) with the participation of all commercial banks, so as to provide enterprises qualified for syndicated loans with preferential interest rates from 3-5% per year and in five years.

Moreover, they should be allowed for having a one-year grace period for principal and interest payments.

The Vietnam Young Entrepreneurs Association (VYEA) previously submitted an open letter to the Government and the SBV asking for supporting measures for young businesses during this difficult period.

Among measures proposed, the VYEA called for banks to lower interest rates for existing loans by 2% for at least one year and 1.5-2% for new loans in 12 months since July 2021.