Clients apply for new bank loans at one of Agribank's offices in Hanoi. (Photo: VNA) The central bank said local banks that meet liquidity requirements and offerlow-interest rates for loans are qualified for the new policy, citing morefavourable conditions and system-wide improved liquidity.
Commercial banks were slashing interest rates in an attempt to bolster economicrecovery and ease up pressure on consumers and businesses, according to SBV.
Agribank, one of the largest banks in Vietnam, said it has slashed 2 trillionVND in interest rates alone since the beginning of the year for 2.2 millionclients across the country.
According to Agribank, businesses, cooperatives and household businesses willbe entitled to a further 20% interest rate cuts from now until the end of 2022.
Vietcombank, one of the country's most profitable banks, led the movement byslashing 1 percentage point off yearly interest rates for Vietnam dong loansfor both consumer and business clients until the end of the year.
Nguyen Viet Cuong, VCB's deputy director-general, said the rates dropapplies automatically, meaning no papers were required from clients, giventhey qualified for the package in the first place.
"The rates drop applied to around 175,000 of our clients, who accountedfor half of VCB's credit loans or 500 trillion VND or 20.8 billion USD,"he said.
HDBank slashed up to 120 billion VND in interest rates (up to 3.5% in some cases)for 43,000 clients.
Tran Hoai Phuong, director of HDBank's business client services, said while therates drop was not as significant as some may have hoped, it shows the bank isfully aware of the difficult situations their clients are in. He added the bankwas willing to sit down with and listen to clients' problems and hopefully, canfind better solutions to support them.
This has been against a backdrop of rising deposit rates. In the second half ofthe year, deposit rates have climbed 3.5-4 percentage points higher compared tothe same period last year, leaving little room left for commercial banks toreduce interest rates further.
Dr Dinh Trong Thinh, from the Vietnam Academy of Finance, said that prolongedhigh-interest rates will likely increase businesses' borrowing costs,operational costs and inflation in the long run.
In an earlier development, the SBV demanded the country's commercial bankstighten credit, while improve liquidity and prioritise key sectors of theeconomy.
SBV's deputy governor Pham Thanh Ha said raising interest rates was part of aneffort to bring down inflation and stabilise the exchange rate.
"As the economy started to bounce back, commercial banks have been pushingout large loans as there was significant demand in the market. Rising depositinterest rates was an important and necessary step to ensure the banks'liquidity and ability to attract capital," Ha said.
He added bringing deposit rates back to a pre-pandemic level has been a commonstrategy by central banks around the world.
"The SBV will continue to monitor developments in the domestic andinternational financial markets. We'll take measures to balance monetaryobjectives and macro-economic elements," he said./.
VNA
