Banks should continue reducing interest rates: central bank governor

Banks should continue cutting costs in order to reduce interest rates, Governor Nguyen Thi Hong of the State Bank of Vietnam said at the government’s Thursday meeting on boosting credit growth for the economy.

Hong clarified the central bank has cut the interest rate four times this year, helping reduce the average loan interest rates in the first 10 months of this year by three percentage points. As a result, loan interest rates have fallen to the pre-pandemic levels, she added.

However, the central bank still has to simultaneously boost credit growth and control risks, she noted. She stressed some challenges, including the ailing corporate bond market and the weak real estate market, amid the country’s high ratio of credit to GDP at 125%, meaning that the banking system remains the biggest credit provider for the economy.

The country’s credit growth reached 9.15% in the first 11 months of this year, with short-term loans conducted normally, but ensuring medium- and long-term credit remains challenging, Hong highlighted.

Regarding solutions, the central bank will consider extension to Circular 02/2023 on debt restructuring and keeping loan categories, a move to help businesses with problems.

Another possible solution is to revamp the credit growth ceiling for banks, she suggested.

Hong also called on banks to deliver their best efforts to streamline loans procedures, ease collateral requirements, and reduce interest rates.