After the State Bank of Viet Nam issued decisions to reduce operating interest rates in the middle and end of March, respectively, lending rates have begun to go down, and businesses are now looking forward to accessing loan packages with reasonable interest rates as soon as possible.

Customers make transactions at a Da Nang branch of the Bank for Agriculture and Rural Development of Viet Nam. Photo: M.Q

On March 31, the State Bank of Viet Nam issued adjustments, with a focus on reducing the refinancing interest rate from 6%/year to 5.5%/year, lowering the maximum interest rate for demand deposits with terms of less than 1 month from 1%/year to 0.5%/year; reducing the maximum interest rate applicable to deposits with a term from 1 month to less than 6 months from 6%/year to 5.5%/year and the interest rate on deposits with a term of 6 months or more set by credit institutions determined on the basis of supply and demand for market capital.

The above-mentioned adjustments took effect from April 3, 2023.

On March 14, the State Bank of Viet Nam announced a 1% reduction in operating interest rates including rediscount from 4.5% to 3.5%/year, overnight loans in inter-bank electronic payment and loans to cover capital shortfalls in clearing between the State Bank of Viet Nam and credit institutions from 7% to 6%/year.

The maximum short-term lending interest rate in VND for priority sectors also decreased from 5.5% to 5%/year. Short-term loans of People's Credit Funds and microfinance institutions decreased from 6.5%/year to 6%/year. This is the first time the State Bank of Viet Nam has reduced the operating interest rate in the last 2 years.

Thus, within half a month, the State Bank of Viet Nam reduced the operating interest rate twice. Through research, from April 3, most commercial banks have simultaneously adjusted and applied new deposit interest rates, creating a basis for lending interest rates to ‘cool down’ in the near future. In fact, some businesses said that the current lending interest rate has been reduced as compared to before the State Bank of Viet Nam made operating interest rate cuts.

Mr. Nguyen Thanh Phuoc, the Director of Ba Loc Sandpaper Adhesive Manufacturing Company Limited located in the Hoa Khanh Industrial Park, Lien Chieu District, said that as compared to the beginning of March, 2023, the company's medium-term loan interest rate was adjusted down by 0.5%/year, from 9.5%/year to 9%/year. Similarly, Mr. To Van Hiep, the Director of Green Lien Chieu Logistics JSC informed that the company's loan packages were adjusted down by 0.3 to 0.5% per year.

Meanwhile, Mr. Le Truong Ky, Vice Chairman of the Da Nang Young Entrepreneurs Association, Chairman of the Board of Directors, General Director of DINCO Technical Construction JSC said that all three commercial banks have been reducing lending interest rates for the company, and specifically one reduced short-term lending interest rates from 8.2%/year to 8%/year, and the 2 others decreased from 10%/year to 9.5%/year.

According to Mr. Kien, the interest rate reduction is a positive signal, but interest rates are still high as compared to the ability and expectation of the business community. The biggest difficulty of enterprises today is cash flow, especially manufacturing, import and export enterprises. These enterprises are stuck with both input and output inventories. The reason is due to a decrease in purchasing power in the export market and slow recovery of orders.

But being faced with old loans that are due, if there is no money to repay, many businesses will be transferred to bad debt group, thus making it more difficult to access loans. Currently, in order to invest in expanding production and anticipate market demand that is expected to improve from the third quarter of 2023, enterprises really need long-term capital flow with interest rates below 10%.

Mr. Tran Minh Dung, the Vice Chairman of the the Da Nang Association of Small and Medium-sized Enterprises, Chairman of the Board of Directors of Da Nang Electronics and Informatics JSC Viettronimex said that reducing interest rates and promoting credit growth will help stimulate businesses to invest in production and business, expecting to welcome the prosperous period again in the coming quarters.

However, in the context that inflation has not cooled down and signals from the world market have not really improved, businesses still face many difficulties. In fact, every decrease in interest rates does not mean that businesses will be able to access, especially for small and medium-sized enterprises, which face many difficulties related to procedures and collateral.

Mr. Vo Minh, the Da Nang branch of the Director of the State Bank of Viet Nam said that the level of support to reduce interest rates of credit institutions depends heavily on subjects and industries, and it is not possible to have separate policies for credit institutions. Each business as well as the ability to reduce how much depends on the financial capacity of the bank.

To support businesses, recently, the State Bank of Viet Nam has issued a document directing the implementation of the policy of subsidising interest rates from the State budget for loans given to enterprises, cooperatives and family-run businesses, according to Decree No. 31/2022/ND-CP dated May 20, 2022 of the national government. On that basis, the Da Nang branch of the State Bank of Viet Nam will continue to direct credit institutions in the area to support businesses to access policies.

According to the report on local banking activities in the first quarter of 2023 released by the Da Nang branch of State Bank of Viet Nam, short-term lending interest rates in VND are common at 8 - 10%/year. The maximum short-term lending interest rate in VND for priority sectors is 5.5%/year and interest rates for medium and long-term loans stand at around 10-12%/year.

It is estimated that by the end of March 2023, outstanding loans of all economic sectors in the area reached VND 211,000 billion, up 0.88% from the end of 2022. Outstanding loans in VND will reach VND 205,200 billion, up 0. 69% from the end of 2022. Foreign currency outstanding loans reached VND 5,800 billion, up 7.95% from the end of 2022.

Medium and long-term loans reached VND 119,000 billion, accounting for 56.4% of total outstanding loans and short-term debt balance reached VND 92,000 billion, accounting for 43.6% of total outstanding loans.

Reporting by MAI QUE - Translating by A.THU