Vietnam PM orders lower lending rates, wider credit access

Vietnamese Prime Minister Pham Minh Chinh has asked the central bank and commercial lenders to further lower lending interest rates and facilitate greater credit access.

This is necessary to support local enterprises still struggling to weather post-Covid impacts and global turbulences, he said at a national conference on monetary policy and growth-bolstering measures held in Hanoi Thursday.

The PM said businesses have complained that they are short of capital and have difficulty accessing loans even as banks record rising deposits.

According to a State Bank of Vietnam (SBV) report, annual interest rates on new deposits now average 3.3%, down 20 basis points (bpts) from end-2023, while rates on fresh loans stand at 6.4%, down 70 bpts. Rates on existing loans remain high, businesses have complained.

Chinh said banks should trim operating costs and loan procedures to minimize annoyance caused to companies; and stop lending to “backyard” ecosystems.

The SBV and commercial banks should also work out measures to increase credit access and absorption, particularly for small and medium enterprises, which account for more than 95% of the total number of firms in the country, the PM said.

He called for improved corporate governance at banks, higher transparency in interest rates, faster digitalization and speedier improvements to banking infrastructure.

The PM also called for increased inspection and supervision of credit approvals and better control over lending to risky sectors.

Notably, he asked the Ministry of Public Security to take urgent action to prevent and handle cross-ownership and manipulation at credit institutions, ensuring their secure operations and financial security.

Total outstanding loans as of February 29 dropped 0.72% from end-2023, the SBV said, attributing the negative growth to seasonally weaker credit demand and poor credit absorption capacity of the economy.

In the face of weak credit demand in almost sectors, real estate and securities firms recorded positive loan growth of 0.23% and 2.56% against end-2023, respectively, according to SBV data.

According to the General Statistics Office, some 63,000 companies either suspended operations temporarily or completed bankruptcy applications in the first two months of this year, up 22.5% year-on-year. Meanwhile, there were 41,100 firms established and/or resuming operations in the period, up 8.5% year-on-year.