Vietnam central bank demands loan interest rate cut of 1-2 ppts

The State Bank of Vietnam (SBV) has instructed credit institutions to join hands to further reduce loan interest rates by one-two percentage points.

To facilitate the move, credit institutions should reduce their expenditures, simplify loan procedures, and further utilize technological advancements, the central bank said Thursday.

The SBV also suggested credit institutions focus on traditional and emerging sectors, such as green transformation, circular economy, and social housing.

The SBV also requested credit institutions to ensure the country’s credit growth target of 5-6% is hit by the end of Q2/2024, while withholding credit for risky sectors. The central bank proposed credit institutions supply more credit to manufacturing and other prioritized sectors.

Credit institutions have been asked to actively review projects and provide timely credit for feasible ventures, and speed up loan approval with flexible considerations for collateral. They are also requested to diversify their services and focus on credits products per citizens’ consumption and livelihoods.

Credit growth in the Vietnamese banking system has been slow this year, reaching 1.6% in the year to April 23, according to a government report delivered in May. The expansion was slower than a 2.66% increase in the same period last year.

Deputy Prime Minister Le Minh Khai said the government is facing macroeconomic management pressure, especially in inflation control, the handling of interest rates, the foreign exchange rate, and highly volatile international and domestic gold prices.

Looking ahead, the government will strive to facilitate access to credit for businesses and citizens, and funnel lending into the real economy, priority sectors, and growth drivers, Khai added.

Vietnam's consumer price index (CPI), an indicator of inflation, in May rose 0.05% from April and 4.44% from May 2023, approaching the government’s target ceiling of 4.5%, the General Statistics Office said Wednesday. Upward inflation pressure makes it harder for the SBV to cut rates.