Interest rate support package should reduce pressure on lending rates | Company

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State Bank of Vietnam orders city lending institutions to implement 2% interest rate support program

As of May 2022, except for the group of state-owned joint-stock commercial banks including Agribank, Vietcombank, Vietinbank and the Investment and Development Bank of Vietnam (BIDV) which have not yet recorded an increase in interest rates. interest on deposits, most other commercial banks increased their deposit rate by 0.3 to 0.5 percentage points compared to the end of 2021.

The pressure to raise deposit rates is also evident in the difference between credit and deposit, which fell to the lowest level in 8 years, when State Bank data showed that credit at the end April 2022 had increased by 6.75% compared to the end of 2021, while capital raising only increased by 3.55%. The surge in credit prompted more commercial banks to join the wave of rising savings interest rates to boost capital mobilization.

Following this development, industry experts said that it was difficult for interest rates on deposits to remain at the low level than before, not only because of the accelerated increase in demand for capital for the credit, but also due to growing inflationary pressure. Therefore, banks need to raise interest rates on deposits to compete with other investment channels such as real estate and securities to attract capital.

According to forecasts by stockbrokers, interest rates on deposits are expected to rise only slightly by 0.3% to 0.5% this year, while interest rates on loans are not expected to increase. decline further as the economy shows signs of recovery. Moreover, experts from VNDirect Securities Company said that the 2% interest rate support program is expected to help reduce the average base interest rate on loans in 2022.

A commercial bank executive in Ho Chi Minh City also said that since the beginning of the year, deposit interest rates for many terms have also been adjusted by 0.4 percentage points, but the bank didn’t raise lending rates much because it saved capital costs by driving digital transformation. In addition, increased demand deposit facilities have helped banks attract low-interest capital to prevent lending rates from rising sharply.

He added that the bank is currently registering the full amount to be implemented under the government’s 2% interest rate support program in 2022 and 2023 to provide capital support to businesses. With this policy, in the short term, lending interest rates will remain broadly stable to help the resumption of production and business activities.

Credit in the first five months of 2022 reached over VND 11 quadrillion, up 7.66% from the end of 2021 and doubled from the same period last year, so many commercial banks are currently short of credit lines. Many banks said that when the interest rate support program was not launched, demand for credit was very high because, after two years of the pandemic, individuals and businesses were in great need of loans for investment and production.

Moreover, with the current momentum of economic recovery, the demand for loans is expected to increase sharply in the coming years.

Some commercial banks have declared their readiness to implement the 2% interest rate support program, but their credit limit has been exhausted. According to Vietcombank, by the end of April 2022, credit had increased by more than 9/10% of the granted limit, which equates to a net increase of about VND 100 trillion ($4.2 billion).

Mr. Nguyen Duc Lenh, deputy director of the State Bank of Vietnam, Ho Chi Minh City branch, said he had ordered lending institutions in the city to implement the rate support program. interest of 2% in accordance with the Circular 03/2022 of the State Bank. of Vietnam for corporate, cooperative and business household loans associated with the disbursement of a credit package of over VND 400 trillion.

At the same time, the branch of the State Bank of Vietnam in Ho Chi Minh City will organize programs to connect banks and enterprises. In addition, the state bank will engage with credit institutions and businesses to make them understand the mechanisms and policies to effectively implement the support package.

With Vietcombank’s total outstanding loans of over VND one quadrillion, customers are eligible for an interest rate support program of around 30% of the total bank balance, but the bank’s current credit limit will certainly not be sufficient to meet customer needs.

According to a representative of VietinBank, currently, those who qualify for the interest rate subsidy account for about 30% of the bank’s total credit. The implementation of the interest rate support program will promote credit growth, but limited constraints will exert strong pressure on the bank’s short, medium and long-term growth.

BIDV said that currently about 10,000 customers are currently eligible for the interest rate subsidy and more people will be eligible for the relief program, so this bank also recommends extending the credit limit.

Because most commercial banks have exhausted the credit limit granted since the beginning of the year, they are waiting for the approval of a new credit limit. Ms. Ha Thu Giang, deputy director in charge of the Economic Sector Credit Department (SBV), said that in principle, commercial banks that do not exhaust their credit limit will be transferred to other banks. Because actually, currently many commercial banks have exhausted their credit limit while some other banks have slow credit increases or decreases.

Regarding the proposal to ease the credit limit, Deputy Governor of the State Bank Dao Minh Tu said that hot credit growth will raise difficulties in controlling inflation, but the credit crunch would affect economic growth, so the credit limit should be resolved satisfactorily.

“The State Bank will review, calculate and monitor the volume of credit to the economy, the first credit growth of which must be in accordance with the objective of controlling inflation and the interest rate policy of the State Bank of Vietnam and other macro relations; at the same time, creating space for the implementation of the 2% interest rate assistance program,” Deputy Governor Dao pointed out. Minh Tu.

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