On June 21, 2021, in Hanoi, the State Bank of Vietnam (SBV) organized a Press Conference under the chairmanship of First Deputy Governor Dao Minh Tu to disseminate the results of the monetary policy management and the banking operations in the first half of 2021 and orientations for the tasks during the remaining months of the year.
First Deputy Governor Dao Minh Tu chairs the conference
Also attending the Press Conference there were representatives from the SBV entities, the SBV branch in Hanoi, several commercial banks, Vietnam Bank for Social Policies, Deposit Insurance of Vietnam, etc.
Implementing the Government’s dual goals of "controlling the epidemic while maintaining economic growth"
Speaking at the Press Conference, First Deputy Governor Dao Minh Tu shared that implementing the directions of the Government and the Prime Minister in the Resolution No. 01/NQ-CP on the major tasks and solutions for realizing the socio-economic development plan and the State budget estimates in 2021 (Resolution 01), in the first 6 months of 2021, the SBV had operated the monetary policy proactively and flexibly, in close coordination with the fiscal policy and other macroeconomic policies in order to control the inflation in accordance with the set target, supporting the macroeconomic stability and contributing to the recovery of the economic growth while maintaining the stability of the currency and the foreign exchange markets.
Overview of the press conference
According Mr. Pham Thanh Ha, Director General of the SBV Monetary Policy Department, in the second quarter of 2021, the SBV monetary policy had been operated in line with the main orientation of supporting the economic recovery in the context of complicated COVID-19 developments, implementing the Government's dual goals of "controlling the epidemic while maintaining the economic growth", ensuring smooth and stable operations of the money market. Specifically, the SBV had operated the monetary policy tools in a flexible manner, maintaining the system liquidity; synchronized the monetary, credit and liquidity measures, helping to maintain the market stability and recovering growth in the face of the unprecedented impacts of the COVID-19 pandemic. As of June 15, 2021, the total means of payment (M2) increased by 3.96% as compared to the end of 2020. The liquidity of the credit institution system had always been ensured. The SBV continued to operate the open market in a proactive and flexible manner.
Regarding the interest rate management, in the first half of 2021, the SBV continued to manage the interest rates in line with the macro balances, the inflation situation, the market developments and the monetary policy objectives, facilitating the reduction of capital costs for people, businesses and the economy. The average bank deposit and lending interest rates in April 2021 decreased by 0.3% p.a. as compared to those of December 2020. The short-term interest cap for bank loans in VND for the priority sectors and fields has been kept at 4.5% p.a. The average USD lending interest rate is at 3.0-6.0%/year.
Also, the SBV has been operating the exchange rates in a flexible manner, with daily announcements any changes of the central exchange rates in consistent with the domestic and foreign market situations, the macroeconomic balances, the money and monetary policy objectives. The foreign currency market had been quite stable with smooth liquidity flows; all legitimate demands for foreign currencies had been promptly and fully met.
Continuing to support customers to overcome difficulties due to impacts of COVID-19
Sharing about the credit operations, Mr. Nguyen Tuan Anh, Director General of the SBV Department of Credit for Economic Sectors, said "the SBV has continuously directed the credit institutions to increase their credit in an effectively and efficiently, focusing on production and priority areas; strictly control credit for potentially risky areas; and implement solutions to remove difficulties in accessing bank credit, facilitating the people's and businesses' access to bank loans. As of June 15, 2021, the outstanding credit of the whole economy increased by 5.1% in comparison with that of the end of 2020, and up by 2.26 % as compared to that of the same period of 2020.
In particular, in order to help the banks' customers to overcome the difficulties caused by the pandemic, the SBV had issued Circular No. 03/2021/TT-NHNN (Circular 03) amending and supplementing Circular No. 01/2020/TT-NHNN (Circular 01) requesting credit institutions and foreign bank branches to reschedule debts, waive or reduce bank interest and fees, maintain the debt categories to support those clients affected by the COVID-19 pandemic.
Accordingly, Circular 03 have extended support to more customers (enterprises) in restructuring their cash flows, restoring production and business operations as well as reducing the pressure from provisioning of the commercial banks. Hence, the commercial banks have been able to accompany the businesses to overcome the difficulties caused by the impacts of the COVID-19 pandemic, and could offer more specific and timely measures to support their customers. With the active engagement of the credit institutions, as of May 31, 2021, the credit institutions had restructured debt repayment terms for 257,602 borrowers with the total outstanding loan of VND 336,663 billion; Waived and reduced loan interest rates for 676,690 customers with the total outstanding loan of VND 1,277,831 billion; Offered new loans at lower interest rates than the ones before COVID with accumulated loan since January 23, 2020 reaching VND 3,508,415 billion for 480,839 customers. Besides, Vietnam Bank for Social Policies (VBSP) (as of May 31, 2021) had extended debt for 174,871 customers with the total outstanding loan of VND 4,363 billion, and offered new loans to 3,052,262 customers with an amount of VND 111,256 billion.
In addition to that, in the first months of 2021, despite the impacts of the COVID-19 pandemic, the payment activities in the economy had been conducted safely, efficiently and smoothly. Mr. Pham Tien Dzung - Director General of the SBV Payment Department - shared that the legal and policy frameworks for payment operations had continued to be improved in order to facilitate the application of new and modern technologies in the development of non-cash payments. The technical infrastructure and technology for non-cash payments, especially electronic payments, had continued to be invested and expanded.
Non-cash payment activities in the first months of 2021 continued to achieve good growth. By the end of April 2021, in the whole country there were 79 payment service providers of payment services via the Internet, and 44 providing payment services via mobile phones. In the first 4 months of 2021, electronic payments via the Internet, mobile phones and by QR Code achieved remarkable results, attracting a large number of users. Compared to the same period in the first 4 months of 2020, transactions via the Internet channels increased by 65.9% in volume and by 31.2% in value; transactions via the mobile phone channel increased by 86.3% in volume and by 123.1% in value; QR Code payments increased by 95.7% in volume and by 181.5% in value.
The SBV and the credit institutions had also continued implementing the payment service fee exemption and cuts to better serve the online payment needs, supporting the people and businesses to cope with the pandemic impacts and ensuring social security and people's livelihoods.
Furthermore, the SBV had also promoted the communication, knowledge sharing and information dissemination on financial inclusion and non-cash payment; proactively developed the content and coordinated with the media to broadcast the financial education programs, which have received high evaluation from the public, such as "Smart money", "Smart-kids", the contest "Correct understanding about money" , "Wise money", “Tay hòm chìa khóa – Smart keys on money” ... in order to raise the people's awareness and knowledge, thereby improving the accessibility to banking products, encouraging the use of non-cash payment methods.
The restructuring of the credit institutions’ system in association with handling with bad debts had continued to be implemented drastically and had achieved positive results. The credit institutions' financial capacity had been strengthened; the charter capital has increased gradually over the years; the quality of governance and administration of the credit institutions has been steadily improved to catch up with the international practices. The implementation of Basel II Capital Standards had continued to be focused on to meet the international practices and standards on capital adequacy. The SBV had directed the credit institutions to actively improve their asset quality, control the credit quality and limit the arising of new bad debts; handle with non-performing loans by urging customers to pay debts, selling and liquidating the collaterals for overdue debts, or selling debts in line with the market mechanism; utilize the risk provisioning funds and develop plans to deal with bad debts in line with the developments of the COVID-19 pandemic. In addition, the credit institutions had also actively implemented various measures to handle with their bad debts in accordance with Resolution 42. After more than 3 years of implementation, the bad debt settlement of the credit institutions had achieved positive results; the bad debt ratio had decreased; the credit quality had improved; various measures mentioned in the Resolution had been implemented, contributing to removing the difficulties and obstacles while speeding up the bad debt handling of the credit institution system.
Keeping abreast of macroeconomic and monetary developments for prompt management
Regarding the orientations of the monetary policy management and the banking operations in the remaining months of 2021, according to Mr. Dao Minh Tu, on the basis of the targets set by the National Assembly and the Government in the socio-economic development plan for 2021, the SBV would continue to operate the monetary policy in a proactive and flexible manner in close coordination with the fiscal policy and other macroeconomic policies in order to control inflation; maintaining the macroeconomic and market stability, supporting a strong economic recovery.
Specifically, the interest rates would be managed in line with the macro balances, the inflation situation, the market developments and the monetary policy objectives, enabling further reduction of the capital costs for the people, the businesses and the economy. The exchange rates would continue to be administered proactively and flexibly in line with market developments, the macro balances, the money and monetary policy objectives.
Keeping abreast of the macroeconomic and monetary developments, the domestic and international COVID-19 situations in order to manage the credit growth appropriately in the direction of credit expansion focusing on priority areas, production and business operations; setting an appropriate orientation for the credit structure in line with the economic transformation, promoting sustainable economic growth and development. Among all, a number of critical measures would be focused on, specifically as follows: Promoting synchronous implementation of the measures to remove the difficulties for COVID-affected customers in order to help them restore their production and business operations; Continuing to coordinate with the relevant Ministries and agencies in proposing and implementing loan packages to support salary payment for employees whose jobs are suspended or interrupted due to the impacts of COVID-19; Strictly controlling the credit for potentially risky areas such as real estate, BOT projects, transport BT projects, stock market; Directing the credit institutions to continue to assist the people and businesses to access bank credit, meeting the people's legitimate needs and limiting "black credit", etc.
Continuing to improve the legal framework to meet the requirements of new business models and technology-based products and services, in which, the focus is on the implementation of a new Decree on non-cash payments and developing a Decree on the Controlled Testing Mechanism for Financial Technology Activities (Fintech) in the banking sector; Submitting to the Prime Minister for promulgation the Scheme on development of non-cash payment for the period of 2021-2025, and coordinating to implement synchronously the solutions and measures mentioned in the Scheme; Coordinating with the relevant ministries and agencies on the pilot plan of using telecommunication accounts for payment of small-valued commodities and services (Mobile-Money); Implementing the Plan on digital transformation of the banking industry to 2025, with orientations to 2030 in order to assist the commercial banks and payment intermediary organizations to provide safe, secure and convenient payment products and services, meeting the increasing customers' demand in the digital era; Enhancing the security and safety of the information technology systems in the banking industry; Protecting the legitimate interests of all customers; Promoting financial communication and education to improve knowledge, skills and accessibility to financial and banking services of the public, promoting non-cash payments and financial inclusion.
Continuing to monitor and assess the impacts of the COVID-19 pandemic on the ability to accomplish the objectives in the Scheme on restructuring the system of credit institutions as well as to the safety of the whole system in order to propose solutions for appropriate guidance and decisions; Directing the credit institutions to strengthen their credit quality control, make adequate risk provisioning in accordance with the law; actively implement measures to control and limit arising bad debts in order to bring the bad debt ratio on the balance sheet to a safe level; Implementing solutions to encourage the credit institutions to develop a network of branches and transaction offices in the rural and remote areas, enabling people to access banking products and services, thereby limiting black credit; Directing Vietnam Asset Management Company (VAMC) to effectively implement the VAMC Development Strategy to 2025, with orientations to 2030, etc.
Also at the press conference, Deputy Governor Dao Minh Tu and representatives of several SBV departments and agencies provided answers to questions raised by the correspondents related to the monetary policy management and the banking operations.
VA