Besides reducing interest rates in dong, many businesses recommended that banks should lower foreign currency lending rates.
Only reducing interest rates in dong
Can Van Luc, a member of the National Financial and Monetary Policy Advisory Council, said that the size of the low-interest credit support package had been raised to 600 trillion dong by banks, which was two times higher than the figure of 250 trillion as originally expected.
In fact, most banks were then deploying many credit packages with lower interest rates than previous times to support businesses and people to overcome difficulties caused by the COVID-19 epidemic.
For example, the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) had simultaneously reduced lending rates for the second phase, in which customers directly affected by the disease were reduced by up to 10 percent of the interest payable to the bank. In comparison, indirectly affected customers were entitled to a five percent reduction of interest. Vietnam Bank for Agriculture and Rural Development (Agribank) had also increased the interest rate reduction support for the credit programme of 100 trillion dong from one percent per year to 2.5 percent per year, helping customers affected by the epidemic.
Not only state-owned banks but also joint-stock banks were actively involved in supporting businesses. Accordingly, Military Commercial Joint Stock Bank (MB) reduced its lending interest rates to 0.9 percent per year for small and medium-sized corporate customers (SMEs) with regular cash flow to MB. Vietnam International Commercial Joint Stock Bank (VIB) reduced by 0.5 percent to two percent of interest rates for existing businesses that were currently borrowing medium and long term loans and lowering interest rates by 0.5 percent to 1.5 percent of new loans, including short-term loans and mobile loans. Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) had just announced the second companion programme with a reduction of interest rates to two percent for SMEs. The plan applied to both existing and new customers who needed to borrow at VPBank. Previously, VPBank also implemented a corporate customer support package affected by COVID-19, such as reducing interest rates to 1.5 percent a year.
However, most of these credit packages were only reducing interest rates for loans in dong. Meanwhile, only a few state-owned banks had announced to lower interest rates on foreign currency loans. For example, the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) was deploying a credit package of $100 million with an interest rate of less than 0.5 percent per annum for existing business customers of BIDV affected by the COVID epidemic. Or, Vietcombank also only dropped by 0.5 percent per year on balance in the US dollar.
Need more support policy in the US dollar
According to the provisions of Circular 42/2018/TT-NHNN, from October 1, 2019, only export processing enterprises and petroleum importers would be allowed to borrow foreign currencies.
Meanwhile, most export processing companies were currently facing many difficulties due to COVID-19 pandemic. Not only were raw materials for production lacked due to the broken supply chain, but the product output also faced challenges due to many big export markets such as the US and Europe being plagued by epidemics.
For labour-intensive businesses, such as textiles, footwear, or seafood processing, the difficulty was compounded when production was narrowed, but they were still struggling to care for thousands of workers.
However, most banks currently only provided measures to support customers to borrow dong. At the same time, export enterprises had a lot of demand for loans in the US dollar but did not receive any support policies.
For that reason, in a recent report to the Ministry of Planning and Investment, the Vietnam Association of Seafood Exporters and Producers (VASEP) recommended banks to supplement US dollar-denominated support policies for import-export businesses that were similar to the support policies in dong. Earlier, at the end of March, all three associations, the Vietnam Textile and Apparel Association, the Vietnam Leather and Footwear Association, and VASEP, simultaneously signed a petition to the prime minister and ministries and branches. It also suggested reducing lending rates to four percent to five percent for dong loans and two percent to three percent for the US dollar loans.
Agreeing with this recommendation, many experts believed that banks should reduce US dollar lending interest rates because that would help businesses have more cash flow to maintain production and operation. Lowering interest rates also help companies reduce capital costs, thereby cutting product costs an extremely important factor in the context of global demand was decreased sharply today. The opportunity to reduce US dollar loan interest rates was also much larger than that of dong when the US dollar deposit interest rate was still at zero percent, a banking expert said.
