Based on a directive of the Government and the Prime Minister, the Governor of the State Bank of Vietnam (SBV) has ordered banks to reduce lending interest rates, raise work effectiveness, and effectuate the target of credit growth by 18% for 2017.
The directive was made after a meeting between the State Bank of Vietnam (SBV) Governor Mr. Le Minh Hung and some credit institutions in the central region on July 27, 1974. Purposes of the working session are evaluating reports on the banking activities; implementing the policies of the Government and SBV related to interest rate policy, credit, bad debt handling. At the meeting, the Governor emphasized: "SBV branches and the commercial bank branches need to speak frankly, especially with regard to the proposed recommendations. Because many Departments, Functional Departments of the SBV and leaders of many commercial banks are meeting here to find out solutions to implement the Directive of the Government and SBV, and to meet the requirements of regional economic development."
Lower interest rates, reasonable credit growth directed to production
Majority of credit institutions in the region said that in the first half of the year, the management of monetary policy and banking activities successfully stabilized the market confidence, achieved the objectives of monetary policy such as stabilizing exchange rates and interest rates, maintaining reasonable credit growth, directing credit flows to production and Government’s prioritized sectors; and contributing to macroeconomic stability. This is an important foundation for the secure and stable development of credit institutions in the region.
According to bank representatives from Vietnam Bank for Agriculture and Rural Development (Agribank), Bank for Investment and Development of Vietnam (BIDV), Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Sai Gon Joint Stock Commercial Bank (Sacombank), Vietnam Prosperity Joint Stock Commercial Bank (VP Bank), common interest rates for short-term loans were from 6% to 9% per annum (p.a); the rate for prioritized fields were 6% to 6.5% p.a; 6.8% to 9% p.a for ordinary loans; and 4% to 5% p.a applicable to loyal customers.
Although credit growth in this region is lower than the national average, credit flows have been focusing on production and Government’s prioritized sectors, especially some banks have implemented some credit programs, especially, some banks have implemented a number of credit programs that help assist households affected by the marine environmental incidents and lending programs under Decree 67.
Regarding the restructuring and Non-performing Loans (NPL) Resolution, credit institutions in the region are taking initiative in implementing the Restructuring Plan approved by the Prime Minister and the Resolution on NPL approved by the National Assembly under the guiding spirit of the SBV.
Also at the meeting, credit institutions have expressed many difficulties and obstacles such as: Finding good customers for lending is a problem for many local credit institutions, despite their continuous efforts to pursue clients; Collateral Loans on Vehicles are also problematic due to regulations on keeping original documents or the need to have more specific instructions for implementation of Resolution on dealing with bad debt.
Saving cost, improving operational quality in order to decrease interest rate
Governor Le Minh Hung appreciated that in the first 6 months of 2017, the banking sector greatly contributed to the local economy. Thanks for the consistent direction of the Government in stabilizing macro-economy and curbing inflation, the banking industry developed safely and healthily; and vice versa, the safe and sound banking operations contributed to macro-economic stabilization. The SBV Governor emphasized that the banking sector obtained a number of encouraging results for the first 6 months of 2017 such as inflation curbing, macro-economic stability; although there was numerous pressure on mobilizing rate, the common lending rate, lending rate for priority fields decreased in order to support for economic growth rate of 6.7%; credit for the first 6 months grew at over 9%; credit flow into production, priority fields was controlled effectively; forex market and exchange rate were stable; the restructuring and NPL resolution were implemented strictly with the aim of developing the banking sector prudently and healthily.
After answering questions of credit institutions in the locations, the SBV Governor instructs as follows:
About monetary policy management: continuing to stick to the direction of the Government and the Prime Minister in managing fiscal policy in collaboration with monetary policy to stabilize macro-economy and curb inflation. Commercial banks in the locations are required to implement monetary policy and banking operations in order to contribute to obtaining the objective of core inflation at 1.8-1.9%; at the same time, controlling inflation at below 4% in 2017.
About interest rate: the SBV Governor instructed the whole banking industry to save cost, improve operational effectiveness to decrease lending interest rate. There has been a basic for the banking sector to decline lending rate while the Government continues to be steadfast to stabilize macro-economy. The SBV cut down key interest rates in open and refinancing markets to support capital for commercial banks to provide loans with lower rates.
About credit, the SBV has consistently directed and required commercial banks to concentrate on providing loans for priority fields, strictly controlling credit for risky fields and achieve credit growth rate of 18%. The SBV has managed monetary policy in a flexible manner to implement directions of the Government and the Prime Minister in order to provide credit for production and business. Commercial banks in the locations are required to cooperate with authorities to enhance connection programs among commercial banks and enterprises with the aim of pumping adequate capital to the economy. At the same time, commercial banks are required to implement Decrees No.55 and 67 to share difficulties with individuals and facilitate them to get access to bank loans.
About restructuring and resolving NPLs: the SBV required commercial banks in the locations to strictly implement Scheme on restructuring the system of credit institutions, which was approved by the Government and Resolution on resolving NPLs passed by the National Assembly. Credit institutions are requested to stick to Instruction of the Prime Minister, Action Plans of the SBV, and directions of the SBV Governor to operate effectively. There have been limitations such as incompletely legal basis, weak supervising capacity, weak governance and management capacity of several commercial banks and etc. Therefore, it is necessary to acknowledge and conduct measures to improve operational quality of credit institutions, enhance supervising and management as well as information technology system, formulate standards and regulations on “Code of Conduct”. At the same time, credit institutions are required to self-formulate their restructuring scheme to be submitted to the SBV. The implementation of restructuring and resolving NPLs should be transparent.
LH- VA