HÀ NỘI — The State Bank of Việt Nam (SBV) has cut several interest rates for the first time since 2014 in order to support business and boost economic growth.

According to the central bank’s statement, 0.25 percentage points have been shaved off the annual refinancing interest rate, rediscount interest rate, overnight interest rate applied to electronic inter-bank payments, and the rate of loans to offset capital shortage in clearing payments between the SBV and domestic banks. The new rates go into effect today.

Specifically, the refinancing rate has been reduced from 6.5 per cent per year to 6.25; the rediscount rate from 4.5 per cent per year to 4.25; and other rates from 7.5 per cent to 7.25 annually.

The maximum annual short-term interest rate for loans in Việt Nam đồng to meet customer demand for capital in some sectors has also been cut by 0.5 percentage points.

Businesses operating in agricultural, export and auxiliary industries; small and medium-sized enterprises (SMEs); and high-tech firms can borrow loans from commercial banks at the maximum short-term rate of 6.5 per cent per year, instead of 7 per cent.

The maximum rate applied to loans supplied by the People’s Credit Fund and other micro-financial institutions has been lowered from 8 to 7.5 per cent.

These adjustments are expected to help increase bank liquidity for loans, stabilise interest rates, the foreign exchange rate and the foreign currency market, thereby contributing to controling inflation and achieving sustainable economic growth.

Move welcomed

Many experts welcomed this move, saying the adjustment is a good sign for the economy and enterprises, especially given that business and production is facing many difficulties, including shortage of capical and high interest costs.

The rate cut will help reduce costs for commercial banks seeking loans from the central bank, boosting lending to enterprises at lower interest rates, they said. 

Trần Hoàng Ngân, a member of the National Assembly’s Economic Committee, said this decision would consolidate the confidence of the market as it proves that the bank system’s liquidity has stabilised after the bad debts resolution.

Trần Du Lịch, a member of the National Monetary and Financial Policy Advisory Council, said the cut was modest, proving a cautious decision and not signaling monetary policy loosening.

Financial expert Phan Minh Ngọc said that with lower interest, credit growth might be speeded up in the coming months, but because the SBV still keeps the ceiling credit growth target at 18 per cent, commercial banks approaching the cap must be choosier in selecting customers.

“Thus, the adjustment basically is not an action to loosen monetary policy, but to help restructure the loans of commercial banks,” Ngọc said, adding that it was unlikely to raise inflation

The central bank will be able to maintain the new interest rates as long as inflation is controlled at low level. But if the US Fed continues raising its interest rates, which would put pressure on the VNĐ/US$ exchange rate, SBV might have to amend its policy, the expert predicted

Following moves

The Bank for Investment and Development of Việt Nam (BIDV) today also announced that the bank would apply a maximum annual interest rate of 6 per cent for short-term đồng loans to prioritised enterprises in accordance with the SBV’s decision.

Start-ups, environmental firms and the bank’s regular customers for at least three years will be able to enjoy the preferential rate, too. Firms and households affected by floods in the central provinces will be offered a maximum rate of 5.5 per cent, according to the bank’s press release.

In another development, VPBank has become the first private commercial bank to reduce its short-term interest rates by 0.5-1 percentage points for SMEs. The preferential rates will depend on the production sector of the borrowers, the length of the credit relations they established, as well as their record of debt payment.

Võ Tấn Hoàng Văn, general director of the Sài Gòn Commercial Bank (SCB), told Pháp Luật Tp Hồ Chí Minh (HCM City Law) that in the next two weeks, SCB would lower interest rates by 0.5 percentage points for new credit contracts serving production in prioritised sectors or being signed by SMEs.

Some other banks also plan a cut in lending interest rates, but say the cut rates must be calculated based on liquidity conditions and taking account other measures to save costs and improve business performance, the newspaper reported.

Nguyễn Văn Đực, deputy director of the Đất Lành Real Estate Company, said that the cut of 0.5 percentage points was not so big but it would have a positive impact on the market and business profits, especially for large firms with heavy loans, he said.

Lý Thành Sinh, general director of the Minh Long Hưng Garment and Embroidery Joint Stock Company, said that beside reducing interest rates, it was important for SMEs to access capital to buy machines and production equipment.

Curently, annual short-term interest rates range from 6.8-9 per cent for regular businesses, and 6-7 per cent for prioritised ones; while medium and long-term rates hover around 9-11 per cent for the former and 9-10 per cent for the latter. — VNS