SBV responds to Enterprises' proposal to lower lending rates

Duc Thien - May 22, 2017 | 03:58 PM GMT+7

TheLEADERIn the context of increasing inflation expectation since 2016, demand for credit capital and Government's bond issuance continues to be higher and higher, while the pace of investment capital disbursement still remains low, putting pressure on credit demand.

SBV responds to Enterprises' proposal to lower lending rates
The Governor of The State Bank of Vietnam Le Minh Hung gave a speech at the Conference of Prime Minister with enterprises taking place on May 17 (Photo: TL)

SBV has consistently carried out appropriate solutions to stabilise the deposit interest rates and reduce lending rates, then supporting the production and business activities of enterprises but simultaneously ensuring the objective of controlling inflation, stabilising money market and foreign exchange.

Lending rate and interest rate have remained stable since 2016. Since the end of September 2016, some credit institutions have decreased interest rates by 0.3-0.5% per year and lowered lending rates by 0.5-1% for business and priority sectors.

Thus, the interest rate level has fallen sharply, in line with the objectives of controlling currency movements and inflation, while ensuring the interests of depositor - credit institutions and borrowers.

Some countries in the region (such as Japan, China) have low interest rates because: (i) low inflation, stable macro economy; (ii) Enterprises are able to forecast and make production and business plan; (iii) Business activities are not overly dependent on bank credit.

Meanwhile, due to Vietnam is a developing country, capital demand for business activities and socio-economic development of all economic sectors is at a high level. Although macroeconomic indicators basically are stable, the important balances of the economy are not really sustainable; inflation expectations are high; and bad debt processing faces many difficulties.

In addition, stock market and bond market have not developed comprehensively; leading to the enterprises' capital demand for economic development depends largely on the banking system, affecting the lending interest rates of credit institutions.

Resolution No.24/2016/QH14 dated November 08, 2016 of the National Assembly instructed the banking sector to reduce the average domestic lending rate by 2020 to be competitive with that figure of ASEAN-4.

SBV will continue to closely monitor the macroeconomic and monetary movements in order to manage stable interest rates in line with the objective of controlling inflation; to instruct credit institutions to offer preferential interest rates to enterprises in priority sectors, SMEs, start-up enterprises and hi-tech enterprises.