Banks should cut lending rates to lowest possible level: Deputy PM

Vietnam’s Deputy Prime Minister Nguyen Van Thang has called for lending rates to be reduced to the lowest possible level, with a focus on priority sectors to better support businesses and economic growth.

Rates show easing trend

Speaking at the government’s first regular meeting for its new term on Monday, State Bank of Vietnam Governor Pham Duc An said the central bank had actively steered policy to keep interest rates at reasonable levels, while instructing commercial banks to adjust rates in response to market fluctuations.

Average deposit rates currently stand at around 6%, up about 0.77 percentage points from the start of the year. Lending rates for new loans are about 8.38%, up 0.3 percentage points but down 0.44 percentage points compared with previous years, he said.

“This indicates a general downward trend and reflects a degree of burden-sharing between banks and businesses,” the governor added.

Maintaining deposit rates at moderate levels also helps stabilize the foreign exchange market, he said, noting that low VND interest rates could prompt households and firms to shift toward holding U.S. dollars, putting pressure on the currency.

Recent developments, however, have shown positive signs. The foreign currency balance has improved, and the exchange rate has been managed flexibly, trading at around VND23,449 per U.S. dollar, up slightly by 0.22% from the start of the year.

The central bank has also supported fiscal policy measures, including reimbursing interest subsidies that commercial banks had advanced to support the economy.

The State Bank of Vietnam said it would continue to closely monitor developments and calibrate monetary policy accordingly.

Push for lower lending rates

Deputy PM Thang acknowledged the central bank’s efforts, particularly its direction to commercial banks to lower interest rates.

However, he said more effective and substantive measures were needed going forward, especially in reducing lending rates, which directly affect businesses and economic activity.

“We must ensure lending rates are brought down to the lowest possible level, focusing on priority sectors to provide maximum support to businesses and the economy,” he said.

Commercial banks need to share more of the burden, while the central bank should do more to narrow the gap between deposit and lending rates, thereby lowering borrowing costs, he added.

While maintaining reasonable deposit rates is necessary to prevent capital shifting into U.S. dollars, reducing lending rates remains the more critical priority, he said.