Interest rates will continue to fall.

VietNamNet•15/07/2023

At the conference summarizing banking activities in the first six months of the year and outlining tasks for the last six months, held on the morning of July 15th, Deputy Governor of the State Bank of Vietnam, Dao Minh Tu, reported that by the end of June 2023, the average interest rates on deposits and loans for new VND transactions of commercial banks had decreased by approximately 1.0% per year compared to the end of 2022.

Due to policy lags, lending interest rates for the economy are expected to continue to fall in the near future.

Regarding credit management, on July 10th, the State Bank of Vietnam (SBV) adjusted the 2023 credit growth target for credit institutions upwards to approximately 14% for the entire system. This is an effort by the SBV to alleviate difficulties for production and business activities as directed by the Government and the Prime Minister , in the context of lower-than-expected economic growth in the first six months of the year and difficulties in securing capital for the economy.

As of June 30th, credit to the economy reached over 12.49 million billion VND, an increase of 4.73% compared to the end of 2022. Of this, the credit structure continued to focus capital on production and business sectors, priority areas in line with government policies, making a positive contribution to the country's GDP growth.

Recently, the State Bank of Vietnam has directed credit institutions to seriously and promptly implement the policy of interest rate support from the state budget for loans of enterprises, cooperatives, and business households according to Decree 31/2022/ND-CP.

By the end of May 2023, interest rate subsidy sales reached over 123,000 billion VND, outstanding interest rate subsidy loans reached over 54,000 billion VND for 2,000 customers, and the cumulative amount subsidized for customers since the beginning of the program reached approximately 500 billion VND.

*Deputy Governor Dao Minh Tu reports to the Prime Minister and delegates attending the conference summarizing the first six months of the banking sector's activities. (Photo: SBV).*

To date, the results of interest rate support have not met expectations due to various reasons. The State Bank of Vietnam has promptly compiled, evaluated, and submitted recommendations to the Government and the Prime Minister.

Besides commercial credit, the Social Policy Bank is promoting the implementation of preferential credit programs for the poor, other policy beneficiaries, and the three national target programs.

As a result, by June 30, 2023, the total outstanding policy credit reached VND 304,431 billion, an increase of 7.4% compared to 2022. Of this, loans under the Socio-Economic Recovery and Development Program amounted to over VND 19 trillion. Loans under the National Target Program for Socio-Economic Development in Ethnic Minority and Mountainous Areas, as stipulated in Decree 28/2022/ND-CP, reached over VND 1,500 billion. The National Target Program for New Rural Development had outstanding loans in communes exceeding VND 1.7 million trillion.

What's the message for the last six months of the year?

Regarding the operational direction of the banking sector in the last six months of the year, Deputy Governor Dao Minh Tu said that the State Bank of Vietnam will manage interest rates in line with macroeconomic balance, inflation, and monetary policy objectives; continue to implement solutions to direct credit institutions to reduce costs to lower lending interest rates, and cut unnecessary fees to support businesses and people in recovering and developing production and business.

Managing credit growth in terms of volume and structure appropriately, meeting the credit capital needs of the economy, thereby contributing to inflation control and supporting economic growth.

Continue directing credit institutions to achieve rapid credit growth while maintaining credit quality and loan safety; direct credit capital towards production and business sectors, priority sectors, and growth drivers of the economy in accordance with the Government's policy; ensure safe and efficient credit operations; continue to strictly control credit in sectors with potential risks; and create favorable conditions for businesses and individuals to access bank credit.

The State Bank of Vietnam (SBV) will also continue to direct commercial banks to implement the VND 120,000 billion credit package from commercial banks' own capital sources, in accordance with the Government's directives. It will also accelerate the implementation of banking sector tasks within the socio-economic recovery and development program and national target programs. In particular, it will focus on implementing the 2% interest rate support program under Government Decree 31/2022/ND-CP and policy credit programs through the Social Policy Bank.

Closely monitor and supervise the implementation of the policy on restructuring loan repayment terms and maintaining loan classifications to support customers facing difficulties, as stipulated in Circular 02/2023/TT-NHNN; promptly provide guidance and resolve any arising issues (if any)...

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