Banks must lower lending rates: Prime Minister

Commercial banks must reduce costs to cut lending interest rates in support of production and economic recovery, says Prime Minister Pham Minh Chinh.

The prime minister signed a document Monday on the supply of credit for the economy, one week after the State Bank of Vietnam (SBV) raised its credit expansion limit for the country's banking system this year by 1.5-2 percentages points to 15.5-16%.

Accordingly, PM Chinh assigned SBV Governor Nguyen Thi Hong to direct commercial banks to accelerate the disbursement of interest rate support programs funded by the state budget for loans to businesses, cooperatives, and business households.

Banks must reduce costs and administrative procedures to enable themselve to further cut lending rates, assisting people and businesses in overcoming difficulties and contributing to reining in inflation and bolstering economic growth.

"Credit must be poured into priority areas and driving forces for economic growth like consumption, investment, and exports; construction of industrial parks, social housing, and workers' accommodation...," he wrote.

The banking industry also needs to improve credit quality, ensuring system safety as well as national monetary and financial security, the document reads.

The government leader assigned the central bank to enhance management, combat cross-ownership, and consolidate the leadership of the Banking Supervision Agency before December 20.

Currently, lending interest rate at many banks has reached 11% a year, even 12-14% at some.

According to the SBV's estimate, about VND240,000 billion ($10.08 billion) will be supplied to the economy given the new credit expansion cap. The central bank has reiterated the credit allocation prioritizes banks with abundant liquidity and current policies to reduce interest rates.

SBV Deputy Governor Dao Minh Tu said last Thursday that overall credit growth had reached about 12.2%.

He stressed that all SBV policies aim to support economic growth in a sustainable manner while continuing to temper inflation and ensure macro-economic stability.

Vietnam’s consumer price index (CPI) in November rose 4.56% from December 2021 and 4.37% year-on-year, reflecting rising inflationary pressure driven by hikes in gasoline prices and housing rent.

On average, the CPI in the first 11 months of the year increased by 3.02% over the same period last year. Meanwhile, core inflation, which reflects price changes without volatile commodities like food and energy, increased by 2.38%, according to the General Statistics Office.

SBV data showed that the economy's outstanding loans as of September had reached nearly VND11,600 trillion ($483.4 billion), up 11.05% compared to the end of last year.