Vietnam PM demands further interest rate cuts to improve access to credit

Prime Minister Pham Minh Chinh has requested the State Bank of Vietnam to continue instructing commercial banks to further cut lending rates to help ease the current credit crunch in the country's slowing economy.

The central bank was also asked to continue reviewing the disbursement of two credit packages, namely the VND40 trillion ($1.7 billion) interest rate aid package and the VND120 trillion ($5.1 billion) social housing support package, with more flexible, feasible, and reasonable lending conditions.

Supervisions and inspections must be strengthened to prevent policy profiteering and law violations in disbursing the two packages, he stressed.

The requests are part of a dispatch issued on Friday, in which the government leader required ministries, sectors, and localities to continue drastically and effectively implementing tasks and solutions to remove difficulties against production and businesses.

The Ministry of Finance was asked to urgently examine, evaluate, and request the General Department of Taxation to immediately handle dossiers for value-added tax refunds by May 28; effectively implement policies on extension, exemption, and reduction of taxes, fees, charges, and land rents approved by competent authorities and continue to propose other support policies.

The PM asked ministers, heads of ministerial-level agencies, governmental bodies, and chairpersons of the people's committees of centrally-managed provinces and cities to focus on tasks and solutions that help to remove obstacles and create favorable conditions for enterprises and residents.

Ministries, agencies, and localities were asked to continue reviewing, inspecting, and removing unnecessary administrative procedures which increase costs and cause trouble to people and businesses.

The State Bank of Vietnam on Thursday lowered the ceiling interest rates on dong-denominated deposits by another 0.5 percentage points for terms below six months to better support the country’s economic growth.

Under the central bank’s decision, deposit interest caps were lowered from 5.5% to 5% per year for terms from one month to below six months. The maximum interest rate for demand deposits and deposits of less than one month remains at 0.5% per year.

Meanwhile, the ceiling rate for deposits in Vietnamese dong at people's credit funds and microfinance institutions was cut from 6% to 5.5% per year.

The rate for deposits of six months or more is set by banks on the basis of market capital supply and demand.