By the end of September 30, commercial banks will terminate foreign currency lending to a specified demand group. This is the roadmap set out in Circular No. 42/2018/ TT-NHNN amending and supplementing a number of articles of Circular No. 24/2015/ TT-NHNN, lending regulations in foreign currency of credit institutions for borrowers who are residents, which were issued by the State Bank of Vietnam (SBV) late in 2018.
Specifically, according to the above circular, by the end of September 30, commercial banks will officially terminate medium and long-term lending in foreign currency to businesses for the import of goods and services.
Previously, from April 1, 2019, banks also stopped short-term foreign currency loans to make cross border payments to import goods and services for goods production and trading plans to serving domestic demand. Instead, businesses having demand of foreign currency need to switch from borrowing to buying foreign currency in the market or borrowing in dong.
According to SBV, the above regulation aims to carry out a roadmap to control foreign currency lending in the direction of narrowing the demand for loans, gradually shifting the relationship of capital mobilisation and foreign currency lending to the relationship of foreign currency trading.
With the above roadmap, the regulator’s goal is to gradually reduce the foreign currency credit ratio over the total credit balance, proceeding to stop lending in foreign currency at the latest by 2030 to basically overcome the dollarisation situation in the economy.
