Zero interest rate appears as banks scramble to offer affordable loans

Vietnamese banks are racing to offer loan packages with preferential interest rates from only 3%, and even interest-free for the first month.

In early November, BIDV, one of the four state-own banks in Vietnam known as the Big 4, announced its interest rates for consumer and business loans had been cut to only 5.4%.

Specifically, for green production, the rate is 5.4% per year for short-term loans of less than six months, and from 6.4% per year for those of 6-12 months. In other fields, preferential interest rates are 5.7% and 6.7% per year, respectively.

For consumer loans for buying houses and cars at the end of the year, BIDV is offering a loan package of 6.5% per year for the first six months, 7% per year for the first 12 months, 7.5% per year for 18-24 months and 8.5% for 36 months. Along with attractive interest rates, the loan term has also been extended to a maximum of 30 years, reducing payment pressure on customers.

Similarly, Vietinbank, another Big 4 bank, has cut lending interest rates to 5.9% per year for small- and medium-sized enterprises. The VND15 trillion ($610.2 million) loan package applies from the beginning of November to the year end and for six-month loans in VND.

In early December, private lender Sacombank deployed a loan package of VND10 trillion ($410.8 million) for businesses with interest rates of 3% per year for one-month terms, 4% per year for two-month terms, from 5% per year for three-month terms, and from 5.5% per year for terms of 4-12 months. The package will expire on January 31, 2024.

In addition, it also launched a VND1 trillion ($41 million) package for medium and long-term loans for enterprises’ production, business and car purchases with a fixed interest rate of 8% per year. For individual customers, the bank is offering loan packages with interest rates from 6% to 7.5% per year, depending on the term.

Another private lender HDBank also announced a VND10 trillion ($410 million) preferential interest rate programme, focusing on December, to support customers across the country to speed up production and business as well as serve their shopping needs at the year end.

This includes a credit package of VND5 trillion ($205.4 million) with an interest rate of 0% in the first month for new individual customers or existing individuals who want to access more loans. For the remaining months, the interest rate will follow the bank's current regulations.

For corporate customers, HDBank has added a preferential package of VND5 trillion, with zero interest rate in the first month for SMEs to pay salaries and bonuses to employees at the end of the year. In the following months, customers will enjoy preferential interest rates from 6.7% per year.

Credit growth is a hot issue discussed intensively in 2023. At the beginning of the year, the State Bank of Vietnam set a credit growth target of about 14-15% which would be flexibly adjusted to suit the real situation. However, as of November 28, credit had grown only 8.78%, significantly lower than the increase of 12.01% in the same period last year and far from the yearly target.

At a December 7 conference on boosting credit for economic activities, Prime Minister Pham Minh Chinh assessed that the results of implementing preferential credit programs had failed to meet expectations as people and businesses still found it hard to obtain loans due to cumbersome procedures. Although interest rates have decreased, they are still high compared to what businesses can afford.

He noted ongoing negative phenomena such as cross-ownership, especially the granting of loans at low interest rates to executives of credit institutions and their relatives.

Therefore, the Prime Minister ordered credit management be faster, flexible and effective. Credit institutions should firmly grasp the situations in different sectors to proactively and flexibly provide credit to the economy and serve production and business, focusing on three growth drivers: consumption, export, and investment.