Rates Lowered to Support Business

11:30:33 AM | 19/3/2020

The State Bank of Vietnam (SBV) has decided to reduce regulatory rates to support businesses adversely affected by the Covid-19 pandemic.

According to its decision on rate adjustment, effective from March 17, the SBV reduced the refinancing rate to 5% per annum from 6%, the discount rate to 3.5% per annum from 4%, and overnight interbank lending interest rate in electronic payment and capital shortage clearance rate to 6% per annum from 7%. The offered rate of valuable papers through open market operations (OMO) decreased from 4% to 3.5%.

At the same time, the interest rate applicable to demand deposits and terms of less than one month is capped at 0.5% from 0.8% per annum. The maximum interest rate applicable to deposits of 1-6 months is reduced from 5% per annum to 4.75% and from 5.5% to 5.25% at people's credit funds and microfinance institutions. Particularly, the interest rate on deposits of six months or more shall be set by credit institutions, based on market supply and demand.

The SBV has also lowered the rate cap on short-term loans in Vietnamese dong at credit institutions for certain borrowers as per Circular 39/2016/TT-NHNN dated December 30, 2016 to 5.5% per annum from 6.0% and to 6.5% from 7% at people's credit funds and microfinance institutions.

Besides, the interest rate for compulsory reserve deposits in Vietnamese dong is 1% per annum and the rate for compulsory reserve deposits in excess is 0%. The rate for compulsory reserve deposits in foreign currencies is 0% and the rate for excess deposits of compulsory foreign currency reserves is 0.05%.

The dong deposit rate is 1% per annum at the Vietnam Development Bank, the Vietnam Bank for Social Policies, people's credit funds and microfinance institutions.

Since the outbreak of the Covid 19 epidemic, Vietnamese businesses have encountered a series of hardships such as congested products, standstill manufacturing, unsold exports or input shortages. Cash flows are inadequate and loans are not revocable to pay off bank loans. This has led to unpayable debts becoming bad debts. Being unable to borrow money to keep up production, they will have to fire workers and shut down operations.

The rapid involvement of the banking sector comes at the right time. At the beginning of February, credit institutions urgently reviewed their borrower status to work out action plans and scenarios to clear hardships against borrowers. By early March 2020, they supported over 44,000 borrowers with a total outstanding loan of VND222 trillion (nearly US$10 billion) with such measures as rescheduling repayment terms, lowering existing lending interests, reducing rates on new loans, exempting fees, deploying credit programs and products to support businesses and people to deal with their damage.

Some banks have also visited businesses to study and assess the impacts of Covid-19 on their operations to discuss timely solutions to difficulties, such as debt rescheduling or debt restructuring in accordance with SBV policies.

To this effect, active lenders include Agribank, Vietcombank, VietinBank, BIDV, Sacombank, TPBank, VPBank, Nam A Bank, ACB, Techcombank, OCB, MB, SCB, Viet Capital Bank, Kien Long Bank, Eximbank, PVCombank, CoopBank, Shinhanbank and UOB.

In addition, nearly 30 commercial banks have joined NAPAS to launch remittance fee reduction and exemption programs to share responsibility with the community and customers, and promote cashless payment.

Mr. Nguyen Quoc Hung, Head of the SBV Department of Credit for Economic Sectors, said, as of March 6, banks registered a total of VND285 trillion (over US$12 billion) to launch preferential credit packages for customers and businesses adversely affected by Covid-19. Particularly, some banks registered to lend VND50 trillion, VND70 trillion or even more than VND100 trillion. Banks will use measures to reduce their costs to further support businesses and reduce interest rates by 0.5-1%. The lending fund will be balanced with their own sources rather than the State budget.

However, according to Mr. Hung, the figure of VND285 trillion is the registered figure by banks. It is also important to monitor how much the economy can absorb, because it is still hard to access loans at this time.

In addition to support measures for businesses, some banks also finance the latter’s actions against the acute respiratory epidemic. Recently, in response to the appeal of the Presidium of the Central Committee of the Vietnam Fatherland Front (VFF) for public support for the fight against Covid-19 and support for people hit by drought and saltwater intrusion, 14 banks donated funds. Each of the following 10 banks - BIDV, Vietcombank, VietinBank, Agribank, MB, Techcombank, HDBank, VPBank, Sacombank and MSB - donated VND10 billion. Each of the four following banks - SeABank, ACB, Bac A Bank and TPBank - donated VND5 billion.

By Quynh Anh, Vietnam Business Forum