The “big banks” continuously reduce lending interest rates, pushing up credit demand

Four“big banks” have sharply reduced lending interest rates to support businesses

Recently, BIDV has announced that from the beginning of June 2023, BIDV would continue to reduce lending interest rates by 0.5%/year compared to the current interest rates for existing medium and long-term loans at BIDV. This is the second time BIDV has reduced lending interest rates for customers with existing outstanding loans at BIDVin 2023.

Previously, following the instructions of the State Bank of Vietnam on implementing the program of VND 120,000 billion for loans of social housing, worker housing, renovating and rebuilding old apartments, BIDV had spent a credit package of VND 30,000 billion for lending at a lower interest rate of 1.5-2% compared to the usual rate of banks.

In addition, from the beginning of the year, BIDV said that it had implemented credit packages with a supporting interest rate of 2% per year compared to normal lending rates to support businesses accessing loans at reasonable fees.

Similarly, from the beginning of the year until now, Vietcombank has reduced lending interest rates twice. The latest is the reduction from the beginning of May to July 31, 2023. Vietcombank decided to reduce up to 0.5%/year of the VND lending interest rate for all loans of individual and corporate customers.

Mr. Le Quang Vinh, Deputy General Director of Vietcombank, said that the number of customers with interest rate reducedwas estimated at 110,000, the size of the loan balance with interest rate reducedwas about VND 700,000 billion. He emphasized that the interest rate reduction was the consensus of the banks and the wishes and aspirations of most people and businesses.

At Agribank, in the 5th interest rate reduction since the beginning of the year, Agribank continues to reduce lending rates by 0.5%/year for existing medium and long-term loans of customers until the end of September 2023. It is estimated that about 2 million customers are supported, with the total amount reduced under this program being more than VND 1,000 billion.

In addition, with short-term credit, Agribank is also implementing many preferential interest rate programs. The lowest is only 4.5%/year depending on the loan term and borrower.

Since the beginning of June, VietinBank has announced a credit package of VND 35,000 billion for preferential loans with interest rates lower than 2%/year for businesses operating in the fields/industries with large import-export turnover such as rice, aquaculture, agriculture.

Therefore, VietinBank has an attractive preferential interest rate for import and export enterprises only from 6%/year for VND and only 3.5% for USD.

For other businesses, VietinBank has also adjusted the lending interest rate to supplement working capital with a loan package size of up to VND 100,000 billion. A representative of VietinBank said that the bank was striving to reduce costs and further reduce deposit interest rates to reduce lending rates. In addition, VietinBankwas also promoting implementation regulations on debt structure, debt extension, disburse an interest rate support packageof 2%.

Currently, state-owned commercial banks account for 44% of the market share, so successive moves to reduce interest rates of these banks are considered to have an impact and effect on credit flows in the market.

According to the money market report of SSI Securities Company, credit demand still increased, although interest rates had decreased significantly after the State Bank had reduced operating interest rates three times since the beginning of the year.

According to SSI estimates, the average lending interest rate (excluding incentives) was currently around 12.5%/year – down about 220 basis points from the end of 2022, but still about 200 basis points higher compared to 2019.

Moreover, SSI said that although commercial banks had all lowered lending rates to stimulate investment and consumption demand, this interest rate was mainly applied to new loans and only a few commercial banks, mainly state-owned commercial banks, reduced interest rates on existing loans.

Talking to the press, SBV Deputy Governor Pham Thanh Ha said that the credit growth of state-owned commercial banks was only about 35% compared to the credit room assigned by the State Bank, while the private banking group had implemented about 50% of the credit roomassigned. This showed that the capital absorption capacity of the economy was weak, so there was still room for growth.