Lower interest rates: Help reduce pressure to repay debts

VCN- Since the beginning of the year, the State Bank of Vietnam (SBV) has reduced the operating rate three times, with a decrease of about 1.5-2%/year. This move is expected to create a source of cheap capital for commercial banks, helping to increase credit flow, thereby helpingthe economic situation.
Banks struggle to sell mortgaged assets Banks struggle to sell mortgaged assets
Hanoi Tax Department: Most industries see drop in revenue leading to decrease in arising tax Hanoi Tax Department: Most industries see drop in revenue leading to decrease in arising tax
State Treasury: Mobilise funds effectively, saving loan charges for State budget State Treasury: Mobilise funds effectively, saving loan charges for State budget
5728-3206-3-binh-on-thi-truong-tai-chinh
Deposit interest rates at many banks have decreased. Source: Internet

"Release" capital flow

According to the SBV, since2016, the operating interest rates have been reduced by 2-2.5%/year, decreasing from 0.8-1.5%/year to the ceiling interest rate for terms below six months and 2.5%/year ceiling lending interest rate for priority sectors.

In particular, under the impact of the Covid-19 pandemic, in 2020 alone, the State Bank has adjusted and simultaneously reduced the operating interest rates ata relatively strong scale. As a result, compared to other countries in the region, Vietnam's reduction in executive interest rates is currently one of the strongest. Specifically, China decreased by 0.3%, Malaysia decreased by 1.25%, Thailand decreased by 0.75%, Indonesia decreased by 1%, and India decreased by 1.15%.

The SBV said that, along with synchronous solutions to support the economy, the sharp reduction of the central bank's operating interest rates contributed to solving difficulties and supporting economic recovery.

According to Standing Deputy Governor of the SBV Dao Minh Tu, the issue of support through lowering interest rates, including new loans or old loans, will create conditions for businesses to access capital more easily. Therefore, lowering interest rates is a basic and important solution for extended credit.

In fact, the wave of lowering deposit rates at commercial banks has been going strong since the beginning of September, leading to a drop in lending interest rates and a series of preferential credit packages to support businesses and citizens.

In addition, the SBV also decided to postpone short-term capital for medium and long-term loans by a year so that banks will not be under pressure to restructure their capital sources, in the context that commercial banks have had to support businesses with liquidity difficulties through reducing lending interest rates, rescheduling debts and restructuring debts.

These can be said to be very necessary moves when many comment that the Government and management agencies need other drastic policies and solutions to support the economy. Many countries have issued very strong solutions to loosen monetary policies to increase capital flows and save the economy in the context of a pandemic.

Help to reduce pressure to repay

Although the market received positive news before the decisions of the SBV to lower interest rates, the actual impact on the whole economy was not as great as expected.

Research Department - Bao Viet Securities Company (BVSC) said that the SBV's decision to lower the operating rate largely reflects the SBV's efforts to accompany and support the economy to boost GDP growth in the last quarter of the year. Because now, for the ceiling interest rate for deposits less than six months, the actual deposit rates of commercial banks in the market at these terms are now below 4%/year, which is below the new ceiling issued by SBV.

Moreover, according to the analysis of the KB Securities Company (KBSV) experts, the deposit interest rate is low and in a downward trend stemming from two reasons. The first is that the liquidity in the system remains redundant when the supply is abundant, while the demand side has not shown many signs of prosperity (until September 30, 2020, credit increases by 6.09% compared to the end of the year. In 2019, the same period last year increased 9.4%). Second, the pressure to lower deposit rates to maintain the appropriate marginal interest rate (NIM) in the context of banks having to cut lending rates to support affected customers amid the pandemic.

It can be seen that the decrease in interest rates on the market comes from a small decision of the SBV. Not to mention, the decision of the SBV to reduce interest rates for the third time this year is not too surprising, but in line with the trend of cutting interest rates of many central banks around the world in the face of global economic decline.

Pham TheAnh, Head of Macroeconomics Department, National Economics University, said the monetary expansion mainly helps to create confidence, reduce debt obligations and stabilize financial stability, and is less likely to restore domestic demand. Interest rates are not a barrier to borrowing, so the move to lower interest rates, although not helping credit growth, will help reduce the pressure to pay off debt.

According to experts, in general, the monetary policies to deal with Covid-19 by the SBV mainly use resources from commercial banks, so the impact on the money supply is not great compared with tools that pump money directly through bond purchases by other central banks.

Therefore, finance - banking expert Dr. Can Van Luc said that interest rates in Vietnam must be at a high ratecompared to the international and regional level due to high value added tax (VAT) of Vietnam, high corporate risk rating BB - rating for speculation, the interest rate of 5-7% is reasonable.

Furthermore, input interest rates must remain attractive to attract capital sources for the banking system. Therefore, supporting the economy through interest rates needs to be selective.Moreover, the more effective fiscal policy in preventing the decline of the economy, so it is necessary to promote more solutions to disbursement of public investment will help stimulate spending andinvestment demand.

By Huong Diu/ HuuTuc

Related News

State revenue in first month of the year equal to 14% of the estimate

State revenue in first month of the year equal to 14% of the estimate

VCN - According to the Ministry of Finance, in January - the first month of 2025, the total state budget revenue is estimated at VND275.9 trillion, equal to 14% of the estimate; meanwhile, the total state budget expenditure is estimated at VND134.4 trillion.
From January 1, 2025: 13 product codes increase export tax to 20%

From January 1, 2025: 13 product codes increase export tax to 20%

VCN - According to the Export Tariff (XK) issued with Decree 26/2023/ND-CP, from January 1, 2025, there will be 13 commodity codes with an export tax rate of 20%.
Tax sector achieves revenue target of about VND1.7 million billion

Tax sector achieves revenue target of about VND1.7 million billion

VCN – Motivated by the revenue collection by the end of December 2024, the General Department of Taxation has accomplished the revenue collection.
Achievements in revenue collection are a premise for breakthroughs in 2025

Achievements in revenue collection are a premise for breakthroughs in 2025

VCN – Motivated by great efforts and effective implementation of solutions, as of December 10 the total State revenue from imports and exports saw a year-on-year increase of 13.8% to VND397,861 billion, meeting 106.1% of the estimate. The revenue us estimated to reach VND420,000 billion, meeting 112 % of the estimate, up 13.9% over the same period in 2023. The achievements in 2024 are a premise for a breakthrough in revenue collection in 2025.

Latest News

Vietnam gears up for potential inflation impact in 2025

Vietnam gears up for potential inflation impact in 2025

VCN - For sound price management and inflation control, Deputy Prime Minister Ho Duc Phoc directed officials to vigilantly track both domestic and international market dynamics. The goal is to proactively develop flexible strategies and solutions, enabling a swift response to any emerging challenges.
VN’s credit conditions in 2025 expected to be stable

VN’s credit conditions in 2025 expected to be stable

The credit conditions for Việt Nam will stabilise in 2025, after improving substantially over the past year, the rating agency VIS is forcasts.
Securities 2025 expects a breakthrough in scale and quality

Securities 2025 expects a breakthrough in scale and quality

VCN – The positive factors inherent in the macro economy and the Vietnamese stock market will continue to create the foundation for the market to maintain stability, good liquidity, and growth in both scale and quality in the new year of At Ty 2025, Chairwoman of the State Securities Commission Vu Thi Chan Phuong said.
Cash reserves in stock accounts at six-quarter low amid margin rise

Cash reserves in stock accounts at six-quarter low amid margin rise

These funds are readily available in investor accounts, but remained undeployed as of the year-end.

More News

Five solutions for developing stock market in 2025

Five solutions for developing stock market in 2025

VCN - On February 5, 2025, at the Gong-beating ceremony to open the stock trading at the Ho Chi Minh City Stock Exchange (HOSE), Deputy Minister of Finance Nguyen Duc Chi introduced five solutions for comprehensive development of the stock market.
Minister of Finance Nguyen Van Thang works with GDVC at the first working day after the Tet holiday

Minister of Finance Nguyen Van Thang works with GDVC at the first working day after the Tet holiday

VCN- On February 3, the first working day after the Tet holiday, Minister of Finance Nguyen Van Thang and the delegation visited and worked with the General Department of Vietnam Customs (GDVC).
The stock market after Tết 2025 presents both challenges and opportunities

The stock market after Tết 2025 presents both challenges and opportunities

Việt Nam’s stock market following the 2025 Lunar New Year (Tết Nguyên Đán) presents a complex landscape of risks and potential gains, driven by foreign capital inflows, economic resilience, and looming corporate bond maturity pressures, according to one securities expert.
Opportunities and challenges in Việt Nam

Opportunities and challenges in Việt Nam's crypto boom

Việt Nam boasts one of the most active investment communities in the cryptocurrency sector. However, protecting investors and promoting sustainable growth requires a robust legal framework.
Đà Nẵng aiming to become a regional financial centre before 2050

Đà Nẵng aiming to become a regional financial centre before 2050

The city is setting out goals to promote the development of the financial system in the 2021-30 period, striving for Đà Nẵng to become a regional financial centre in just 25 years.
Which investments to make in 2025?

Which investments to make in 2025?

Financial reports indicate a large amount of cash in the banking system at the end of 2024. Investors in 2025 will have plenty of choices of where to put their money, according to economists and financial analysts.
5 strategies for reallocating houses and land

5 strategies for reallocating houses and land

VCN - The rearrangement and disposal of public-owned houses and land have been officially regulated in Decree No. 03/2025/ND-CP (Decree No. 03), which has just been issued by the Government. According to Decree No. 03, there are five forms of rearrangement and disposal of houses and land.
Stock market expected to rebound positively after Tết holiday: expert

Stock market expected to rebound positively after Tết holiday: expert

Currently, the VN-Index is fluctuating within a wide range of 1,200 to 1,300 points. Without a decisive breakout in either direction, this level of liquidity remains typical.
Ministry of Planning and Investment proposes piloting a cryptocurrency exchange at financial centres

Ministry of Planning and Investment proposes piloting a cryptocurrency exchange at financial centres

The Ministry of Planning and Investment (MPI) has proposed a controlled pilot programme for fintech activities, including digital asset and cryptocurrency trades at financial centres.
Read More

Your care

Latest Most read
Vietnam gears up for potential inflation impact in 2025

Vietnam gears up for potential inflation impact in 2025

For sound price management and inflation control, Deputy Prime Minister Ho Duc Phoc directed officials to vigilantly track both domestic and international market dynamics.
VN’s credit conditions in 2025 expected to be stable

VN’s credit conditions in 2025 expected to be stable

The credit conditions for Việt Nam will stabilise in 2025, after improving substantially over the past year, the rating agency VIS is forcasts.
State revenue in first month of the year equal to 14% of the estimate

State revenue in first month of the year equal to 14% of the estimate

VCN - According to the Ministry of Finance, in January - the first month of 2025, the total state budget revenue is estimated at VND275.9 trillion, equal to 14% of the estimate; meanwhile, the total state budget expenditure is estimated at VND134.4 trilli
Securities 2025 expects a breakthrough in scale and quality

Securities 2025 expects a breakthrough in scale and quality

VCN - The market maintained stability, good liquidity, discipline was improved, increasing transparency and sustainability.
Cash reserves in stock accounts at six-quarter low amid margin rise

Cash reserves in stock accounts at six-quarter low amid margin rise

These funds are readily available in investor accounts, but remained undeployed as of the year-end.
Mobile Version