Vietnam to cut interest rates on loans via cash flow


By Quynh Trang September 28, 2021 | 8:30 p.m. GMT +7

An employee counts Vietnamese notes at a bank in Hanoi. Photo by VnExpress / Giang Huy

The central bank is preparing to issue VND 3 trillion ($ 131.65 million) to banks so that they can reduce their interest on loans worth VND 100,000 billion in order to stimulate economic recovery.

This is a mechanism that the State Bank of Vietnam (SBV) is considering to compensate for the loss of bank income resulting from the drop in interest on loans to 3-4% per annum, the chief credit officer said recently. of the SBV for economic sectors, Nguyen Tuan Anh.

The current rate of term loans for priority sectors is 4.5% per annum.

Economist Le Xuan Nghia said the VND 3 trillion support is too little for a strong economic rebound and proposed a bigger one.

The central bank could consider using its foreign exchange reserves, or the finance ministry could issue bonds, to fund the support, he added.

The SBV’s announcement came as the National Assembly suggested that the government inject liquidity into the economy by lowering loan interest rates, as it did during the 2009-2010 period.

However, Anh said this idea needs to be carefully considered because after the 2009 economic crisis and the interest compensation decision, inflation soared to 18.6% in 2011.

Any policy that does not ensure macroeconomic stability would have a negative impact on the economy, he added.

Nguyen Quoc Hung, general secretary of the Association of Vietnamese Banks, said the bad debt consequence resulting from the 2009 crisis persists to this day.

Of the 145 trillion VND stimulus package at the time, 17 trillion VND was interest offsets mobilized on foreign exchange reserves, he said.

He proposed that state coffers be used for interest compensation, with no “prioritized” sectors, as all have been affected by the fourth wave of Covid-19.

Recent cuts in bank interest rates have lowered profits by 26 trillion dong compared to those expected before the rate cut.

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