Banking sector reduces lending interest rate to support enterprises

Banking sector reduces lending interest rate to support enterprises

On the dialogue of the PM Nguyen Xuan Phuc on the topic “Resolutions on supporting enterprises to become the driving force for economic growth” held on Saturday April 29, 2016 in Ho Chi Minh City, SBV Governor Le Minh Hung stated that many commercial banks agreed to share the burden of difficulties with enterprises via cutting operational costs, reducing lending interest rate for several sectors and borrower groups.

Speaking at the dialogue, Governor Le Minh Hung said that in first 4 months of 2016, the SBV conducted a number of consistent and synchronous measures to contribute in strengthening macroeconomic and monetary stability. Particularly, VND mobilizing rates slightly increased by 0.2 – 0.3 percentage point p.a but they were relatively stable; The common mobilizing interest rates fluctuatted from 6 to 9% p.a for for short-term loans, 9 – 11% p.a for medium and long-term loans. Exchange rate and forex market remained stable after the SBV applied new forex management scheme. The SBV was able to buy foreign currencies to increase the state foreign exchange reserve. Credit loans again was boosted and was in the trend of increasing right in the begining of the year contributing to supplying more capital for enterprises, supporting for economic growth. By April 20, 2016, the total loan oustanding increased by 2,99% as compared to end 2015 and the rate was also higher than the same period of the last year; the operational safety of credit institutions was ensured; the whole system of credit institutions contined to accelerate NPL resolution and restructure. Positive movements of banking and monetary operations had significantly contributed to stabilizing macroeconomic environment in general and business and production perfomances of enterprises in particular.

But these achievements aside, currently, several issues of macroeconomy and monetary performance are bringing numerous challenges for Government and Vietnam Banking sector to cope with. Particularly, a slowing down signs have been recognized for economy development as economic growth of QI/2016 was 5.46%, much lower as compared to QI/2015; serious droughts, saltwater intrusion may lead to serious difficulties preventing obtaining the set goal of economic growth of 6.7%.

Right from begining of the year, increasing credit perpormance has actively support for economic extention, however medium and long term loans for real estate sector is in the trend of the sharp rise. Up to April 20, medium and long term loans increased 5.55% as compared to end 2015; lending for real estate went up by 3.92% in comparision to end 2015); mobilizing interest rate slightly increased and cound be continue suffer increasing presure in the coming time; exchange rate and forex market were basicly stable in the context of complicated and unexpected development of the world economy; trade deficit could be appear while domestic demand remained goining up and credit demand was increasing...

Facing these challenges together with Government and Prime Minister’s determination to realize economic growth target of 6.7% in 2016, controling inflation rate under 5%, in the coming time, the SBV will continue managing monetary policy in proactive, flexible manner in close combination with other macroecominc policies, and concentrate in several orientations as follows:

Firstly, closely watch the intereat rates, lending performance, and liquidity of credit institutions in combination of proactive conduction of consistent instruments and measures to decisively stabilize lending interest rates.

Secondly, ecourage credit institutions to cut down operational cost to be able to reduce lending interest rates for business and production sector, contributing to easing difficulties of enterprises. Recently, SBV held a meeting with commercial banks to find out solutions for expanding credits for enterprises. In conclusion, the whole system of credit institutions had agreed to sharply reduce operational cost, reduce lending rates for a number of sectors and borrowers.

Thirdly, manage credit performance toward increasing credit extension in combination with controlling credit quality and safety, supporting for economic growth, concurrently, managing presure on interest rate effectively; timely detecting and warning credit institutions of the threat of hot credit growth, specifically credits granted in real estate purchsing, and high ratio of short term capital mobilizing on medium and long term lending...

Fourdly, closely watch the macro-economic and monetary movements to proactively manage foreign exchange rates in line with macroeconomic balances and improve the value of VND; in case of too much fluctuation, the SBV will timely intervene in collaboration with other instruments and measures to support the stabilization of foreign exchange rates and forex market.

Fiftly, after this dialogue, the SBV continues decisively restructuring credit institutions and NPL resolution, accelerate supervision and inspection performance in order to ensure the safe and effective operations of banking sector

Sixthly, the SBV will issue Directive to guide the whole industry to find out solutions to stabilize money and forex market, stabilize lending interest rates and ensure the operational safety of the banking system.

At the dialogue and over the past time, the SBV received many responses and recommendations of enterprises with several issues relating to bank loan access, reducing lending interest rates, lending in foreign currencies, and the roadmap to implement Circular No. 36/2015/TT-NHNN.

On the basis of the enterprise recommendations, SBV Governor commited to instruct SBV entities to accelerate administrative reform, creating favourable conditions for enterprises accsessing bankin loans; continue manage synchronous measures to stabilize lending interest rates. In particular for lending in foreign curencies, the SBV do not allow credit institution to provide short term loans in foreign currencies to customers who borrow capital to conduct production and business of export goods.

In order to ease difficulties for enterpreses, in the coming time, SBV will review the proposals of credit institutions relating to lending of priority fields as stipulated in Resolutions, Decrees, Decisions and Directive of the Government, Prime Minister and consider the schedule to apply regulations on ratio of using short term mobilizing capital to lend in medium and long term; risk ratio applied to real estate credit in appropriate manner.

During the dialogue, several credit institutions had announced their decision on reducing short term interst rates of lending from April 29 such as BIDV with committment to reduce 0.5% for short term loans; and apply lending rate for medium and long term loans at below 10% p.a.

Vietcombank announced to adjust preferable lending rate applied to VND medium and long term loans at maximum of 10% p.a for 1 year to support for direct production and business enterprises; the Vietcombank also provide a supportivve package of VND 300 billion to lend the enterprises

Vietinbank issued press realese to decrease lending interest rates by 1% on the total interest rate per annum for projects rated Good, and apply the maximum lending interest rate of 10% p.a for medium and long term loans. The Agribank also started to implement preferable lending interest rates...

Several joint stock commercial banks also announce their action plans, particularly, TPBank provides VND 5,000 billion to lend with preferable interest rates from 6.9%. p.a for import and export enterprises using international payment services of this bank and for supportive industrial enterprises.

In general, commercial banks have agreed to plan lending interest rate by 0.3 – 0.5 percentage point p.a and reduce lending interest rate of medium and long term loans to below 10% p.a. Hence, the enterprises will get more opportunities to access the bank loans with preferable cost, and able to overcome difficulties and expand their production and business.

VMH