Prime Minister Calls on Central Bank to Continue Lowering Interest Rates

Prime Minister Pham Minh Chinh has directed the State Bank of Vietnam to continue implementing comprehensive and determined measures to reduce interest rates, especially loan interest rates, as discussed during the mid-year banking activity review conference for the first six months of 2023.

On July 15, in Hanoi, the State Bank of Vietnam (SBV) organized a virtual Conference to review the banking performance in the first half of 2023, and to re-disseminate the tasks of the banking sector for the remaining months of the year.

At the conference, the State Bank of Vietnam announced that the average deposit and loan interest rates for new transactions, up until the end of June, have seen four reductions, amounting to around 1% per annum as compared to those of the end of 2022. Banks have also conducted preferential credit packages to reduce the lending interest rates by a total of 0.5% to 3% per year, depending on the customer segment, applied to new loans.

Prime Minister Calls on Central Bank to Continue Lowering Interest Rates

On behalf of the Government, Prime Minister Phạm Minh Chính acknowledges and commends the high determination and efforts of the State Bank of Vietnam and the banking sector in the first six months of 2023, which have yielded initial encouraging results and made significant contributions to the overall achievements of the country. However, alongside the attained results, there still exist limitations and shortcomings.

Despite the four reductions, the actual interest rates are still relatively high. Therefore, the Prime Minister has instructed the banking sector to implement decisive measures such as cost reduction and fee reduction in order to lower interest rates, especially loan interest rates. 

Prime Minister Calls on Central Bank to Continue Lowering Interest Rates

In addition, despite the modest increase in credit balances, many businesses still face challenges in accessing new credit. By the end of the second quarter of 2023, the total credit balance across the entire economy reached over 12.49 million billion VND, marking a 4.7% increase compared to the end of 2022. This represents the lowest growth rate in several years.

In this context, the Prime Minister has also instructed the banking sector to review the lending criteria for appropriate adjustments. This is aimed at enhancing the accessibility of credit for businesses and individuals, particularly small and medium-sized enterprises. Additionally, banks are urged to actively implement the 40 trillion VND credit package to support interest rates and the 120 trillion VND package for social housing loans, as a means to further promote these initiatives.

According to the Prime Minister, the shift in monetary policy from “tight” to “firm” and further transitioning towards “flexible, accommodative” measures starting from June 2023, as outlined by the Government, is necessary. This will help alleviate difficulties and promote business growth and production. However, the Prime Minister also emphasized that flexible and accommodative monetary policies need to be focused, prioritized, and well-controlled.

Prime Minister Calls on Central Bank to Continue Lowering Interest Rates

Additionally, during this conference, the Prime Minister assessed that the progress in handling weak credit institutions remains slow. The banking sector has been directed to focus on and urgently handle the restructuring of underperforming commercial banks, ensuring systemic liquidity, and prompt action was emphasized for the Asset Management Company (VAMC) to continue effective and timely debt resolution.

According to VnExpress