Vietnam's central bank instructs more lending to rice sector amid sharp price drops

Vietnam's central bank has directed commercial banks to promptly meet the loan needs of individuals and businesses involved in producing, processing, purchasing, temporarily storing, and consuming rice in 2025, particularly in the Mekong Delta.

Vietnam’s rice exports in February were 560,000 tons or $288.2 million, down 13.6% in value year-on-year, according to the agriculture ministry.

The average export price during the first two months of the year was $553.60 per ton, down 18.3% compared to the same period last year.

The Vietnam Food Association (VFA) attributed the sharp decline in rice prices to India lifting its export restrictions and expected bumper crop yields, along with increased rice production in Vietnam, Thailand, and Pakistan. This has significantly boosted the global rice supply for 2025.

Following Prime Minister Pham Minh Chinh's direction on March 4 regarding managing the balance between rice supply and demand amidst global and domestic market developments, the State Bank of Vietnam on March 5 instructed commercial banks and SBV branches in areas 13, 14, and 15 to implement a series of measures to support rice production and export.

Commercial banks are required to balance capital sources and meet the loan needs of individuals and enterprises engaged in rice production, processing, purchasing, temporary storage, and export in 2025.

This includes especially the purchase of commodity rice from the 2025 winter-spring crop in the Mekong Delta. Banks should ensure that individuals and businesses with effective plans and full legal compliance are not hindered by cumbersome loan procedures.

The SBV encourages banks to consider increasing loan limits and terms for businesses with the experience and capacity to purchase, process, export, and store rice. This will help facilitate medium- and long-term credit to support investments in rice storage, processing, and preservation.

The central bank also instructed commercial banks to reduce operating costs, apply information technology, and implement other measures to lower lending interest rates.

Banks should be willing to share part of their profits to support individuals and businesses in accessing credit, which will stimulate production, particularly in the rice sector, it stated.

Commercial banks should also offer preferential interest rates and simplify loan procedures and collateral requirements to support rice producers, processors, and exporters in meeting seasonal demands, the SBV noted.

It emphasized the continuation of credit policies for agricultural and rural development. The focus will be on financing rice production models, from farming to processing and consumption.

The loan program for linking production, processing, and consumption of high-quality, low-emission rice products in the Mekong Delta, as outlined in a prime ministerial decision dated November 27, 2023, will also be promoted.

The SBV encourages banks and businesses to coordinate with the Vietnam Food Association and the Vietnam Rice Industry Association to share information about credit policies and help businesses access financing when necessary.

Thailand has also taken action in response to falling rice prices. Thailand is reportedly seeking cooperation with India and Vietnam to find ways to tackle falling rice prices, Commerce Minister Pichai Naripthaphan said on Thursday, amid simmering protests by local farmers calling for more support from the government.

Thailand is in talks with both countries to reduce competition, hoping to create a balance in rice prices in the global market and help farmers have stable income, Pichai told the parliament.

"We have already discussed it, but we are waiting for another meeting to see how much we can do about this," he said of talks with India and Vietnam.

Paddy prices in Thailand dropped by 30% year-on-year to an average of about 8,600 baht per ton last month, according to the Commerce Ministry. Growers are calling for the government to help them sell rice at higher prices.

Thailand, the world's second-largest rice exporter, is likely to be hit hard by the resumption of rice exports by India, with the ministry expecting a 24% year-on-year decline in rice exports to 7.5 million tons this year.

Area 13 comprises of four provinces Tien Giang, Long An, Ben Tre, and Tra Vinh. Area 14 refers to five provinces and cities Can Tho, Hau Giang, Soc Trang, Bac Lieu, and Vinh Long. Area 15 includes Kien Giang, An Giang, Dong Thap, and Ca Mau.