Loan interest rates are gradually "cooling down"

	Banks push "cheap" capital for loans at the end of the year
	Credit institutions and real estate businesses continue to repurchase bonds
	Adjust expenditure loan interest

According to experts, Vietnam's interest rates are currently at their peak and on a downward trend. Photo: ST

Simultaneously launching preferential credit packages

Grasping the need for quick access to capital for enterprises, recently, Vietnam Technological and Commercial Joint Stock Bank (Techcombank) has launched a credit package of VND 30,000 billion with preferential interest rates up to 2% to support all enterprises, especially import and export ones.

Similarly, Military Commercial Joint Stock Bank (MB) has also actively developed supply chain financing policies, supporting business individuals to access bank capital with competitive interest rates. Accordingly, MB has implemented a loan program for business individuals with a preferential interest rate of only 0.7%/month, equivalent to 8.5%/year, applied right from the time of disbursement.

In addition, MB will implement a program to reduce business loan interest rates even at a maximum of 1% for those who maintain an average current account balance in a good month at MB account.

According to MB, in 2023, instead of pushing lending rates high to increase profits, the bank will focus on reducing capital costs, promoting demand deposits (CASA), optimizing operating costs, and managing asset quality to limit provision costs. This still maximizes the bank profits but enables customers not to bear too high interest rates.

Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) applies a preferential interest rate of only 7.5%/year to corporate customers who are in need of capital to pay for imports and exports.

Southeast Asia Commercial Joint Stock Bank (SeABank) launched a preferential package of VND 3,000 billion, reducing the lending interest rate up to 1%/year for short-term loans for business purposes.

State-owned commercial banks have also simultaneously launched preferential credit programs. Specifically, the Joint Stock Commercial Bank for Industry and Trade of Vietnam (VietinBank) announced the implementation of a preferential interest rate package of VND 10,000 billion, applicable to small and medium-sized enterprises at first lending transactions or without any loan disbursements in 6 past months. Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) committed to reducing interest rates by 0.5%/year for all customers with existing and new outstanding loans from the beginning of 2023.

By the end of April 2023, the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) will deploy a short-term loan package with a scale of VND 30,000 billion, with a preferential interest rate of only 8%/year for loans with a fixed less than 6 month term; or only 9%/year for loans from 6-12 months.

Previously, the Bank for Agriculture and Rural Development (Agribank) announced a maximum reduction of 3% in interest rates for real estate borrowers at the time of January 31, 2023 facing difficulties due to Covid-19 or due to adverse fluctuations of the macroeconomic situation. It is expected that in 2023, Agribank will continue to spend more than VND 100,000 billion to provide preferential loans with interest rates to corporate customers, import-export customers, health sector, education industry; reduce interest rates for customers that face difficulties in production and business activities.

As for the real estate sector, the Governor of the State Bank (SBV) said that the SBV had a meeting with state-owned commercial banks to set aside a credit package for real estate worth VND 120,000 billion with loan interest rates for both builders and homebuyers lower than 1.5-2% of the average lending rates of banks in each period.

Interest rates fall but access to capital must be increased

It can be seen these are such encouraging moves from banks in order to lift osculates of high lending interest rates. During Government meetings, the Prime Minister always asks the State Bank to encourage credit institutions to reduce costs in order to stabilize interest rates and strive to reduce lending rates.

According to economic expert Assoc. Prof. Dr. Pham The Anh, National Economics University, Vietnam has room to reduce interest rates thanks to relative inflation compared to the whole area. Moreover, in 2023, it is expected that the US Federal Reserve (Fed) will only raise interest rates twice, then stop, so it does hope that the pressure for Vietnam to raise interest rates including inflation and interest rates from outside may be very little. Therefore, Vietnam's interest rates are currently at a peak and on a downward trend.

In the same opinion, experts at VNDirect Securities Company also expect deposit interest rates to peak in the first quarter of 2023 and cool down in the second quarter of 2023. Moreover, the SBV also made efforts to lower lending rates to promote economic growth. Accordingly, banks with lower lending rates will be granted higher credit limits than other banks. Therefore, VNDirect believes that some banks will actively reduce a part of the net profit margin (NIM) in order to receive a higher credit allocation limit in the future.

However, not only do high interest rates challenge enterprises but they also cause low access to loans. According to a survey by the Vietnam Confederation of Commerce and Industry (VCCI), the percentage of businesses that can get loans from the credit institution system has tended to decrease in recent years. If in 2017, 49.37% of enterprises participating in the survey had access to capital from credit institutions, this number has continuously decreased over the years. For example, in 2021, only 35.41% remained.

Therefore, VCCI suggested that it is necessary to amend policies on credit institutions in the direction of promoting competition among credit institutions to attract customers and enhance access to credit.