SBV is not planning further rate cuts as of now. The central bank will maintain the current lending rate and monitor and evaluate the developments of the COVID-19 pandemic to take appropriate management measures, Dao Minh Tu, Deputy Governor of SBV, said at a recent press briefing on the banking sector’s performance in the third quarter of the year.
Earlier, SBV had implemented three rate cuts with a total reduction of 1.5-2 percentage points per annum for regulatory interest rates, 0.6-1 point per year for term deposits of less than six months and 1.5 points annually for short-term deposits in priority sectors. As a result, the lending rates were adjusted downward by around 1 percentage point last year and some 0.55 points in the first half of 2021.
Lending rates have fallen around 0.7 points and deposit rates have declined 0.4 points in the year to date.
Credit institutions have offered loans with lower interest rates compared to that of the pre-COVID-19 period, with accumulated loans exceeding VND5.2 quadrillion for 800,000 borrowers from January 23 last year to this September. They had also offered rate cuts and exemptions to some 1.7 million customers affected by the pandemic with a total outstanding loan balance of nearly VND2.5 quadrillion.
Regarding credit, the deputy governor said the banking system’s credit rose 7.42% between the end of last year to October 7 this year, which was 1.94 points higher than the same period in 2020. The total M2 payment instrument inched up 5.65% against the end of 2020 and expanded 11.56% compared to the same period last year.
Tu said the results were positive given the fact that many provinces and cities, including the two major cities of Hanoi and HCMC, enforced the stay-at-home mandate for several months under the prime minister’s Directive 16.
As for proposals to relax lending conditions, the SBV official said reducing the loan quality and conditions would not ensure the safety of the banking system. He said the central bank will create favorable conditions to expand credit if necessary but will not ease lending conditions.