With the policy of supporting people and businesses, from August 1st to December 31st 2019, four state-owned banks including Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) and Commercial Joint Stock Bank for Agriculture and Rural Development of Vietnam (Agribank) have lowered lending rates for priority areas such as high-tech agriculture, clean energy, startup, etc. Compared to the ceiling level regulated by the State Bank of Vietnam (SBV), the reduction is from 0.5 to one percent per annum to 5.5 percent per annum.
Shortly thereafter, many joint stock commercial banks also cut lending interest rates, particularly for priority sectors. At HCM City Development Commercial Joint Stock Bank (HDBank), a credit package of 10 trillion dong is offered to businesses operating in high-tech agriculture and green agriculture across the country. The preferential lending rates are one percent lower than the normal rates.
Particularly for clean energy sector, businesses installing solar roof power system will be given preferential loans by HDBank at the rate of 70 percent of the loan value and a term of five years. The secured asset is the power system with a maximum funding of 10 billion dong. Households can also access this loan package with a maximum borrowing value of 200 million dong and a term of 24 months.
One year after launching the green credit package, HDBank so far has granted credit to many solar roof power system projects with a total funding of 300 billion dong. HDBank plans to fund 1.1 trillion dong to clean power projects by the end of 1.1 trillion dong. The bank has also launched credit package for clean energy solar power projects under Vietnam’s power development plan with a total capital of seven trillion dong.
HSBC has also support customers installing solar roof power system with interest rate from 11.99 percent per annum. HSBC committed to provide 100 billion US dollars for financial support and sustainable investment by 2025. By the end of the first quarter (Q1) 2019, HSBC successfully disbursed 33.6 billion US dollars of these loans.
Similarly, Viet Capital Commercial Joint Stock Bank (VietCapitalBank) offers 100 percent supports the borrowing plans of customer installing solar roof power system. The lending rate is one percent less than the rates applied by the bank.
Nam A Commercial Joint Stock Bank (NamABank) is launching a green credit programme to provide financial solutions for environmental protection and CO2 emission reduction projects. For individual customers, NamABank applies rate of seven percent per annum for short-term loans and 7.5 percent per annum for medium and long-term loans. The lending rates for agriculture and rural development projects are from 9.9 percent per annum.
Consumer interest rates remain high
Banks have been innovating their loan portfolio, focusing on promoting consumer loans and targeting individual and household customers to address capital needs for daily life such as buying cars, buying houses, medical treatment, travel, etc. because this segment offers high Net Interest Margin (NIM).
At Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), borrowers can access a capital source of 500 million dong with interest rate from 0.73 percent per month, equivalent to 8.76 percent per annum on a term of up to five years. For small and medium-sized enterprises (SMEs), Sacombank offers 10 trillion dong of preferential capital with interest rates from six to seven percent per annum for short terms and 8.5 percent per annum for medium and long terms.
NamABank applies interest rates from 9.99 percent per annum for individuals borrowing consumer loans, business loans, housing construction or repair loans, car loans, etc., the lending ratio can reach 100 percent of the capital demand. Meanwhile, VietCapitalBank supports car loans with value reaching for up to 85 percent of the car value, on terms from 24 to 72 months, with interest rates from 8.3 percent per annum, etc.
For SME customers, VPBank lowers one percent per annum interest rate for unsecured loans and 0.5 percent per annum for short-term secured loans. Asia Commercial Joint Stock Bank (ACB) launches a credit package of three trillion dong with preferential interest rates from 7.5 percent per annum. Vietnam Technological and Commercial Joint Stock Bank (Techcombank) offers an interest rate discount of 0.5 percent per annum for short-term loans in dong. Bao Viet Commercial Joint Stock Bank (BaoVietBank) launched a 1.5 trillion dong credit package from the end of Q2 2019 at interest rate discount of 0.5 percent per annum, etc.
At Orient Commercial Joint Stock Bank (OCB), the bank offers unsecured consumer loans to customers with income from three million dong per month, a 100 million US dollar credit package to women-owned SMEs, and a three trillion dong preferential credit package to SMEs in the field of import and export and logistic fields, etc.
For the credit package for SMEs with interest rates from 5.99 percent per annum, OCB also offers interest rate discount of 2.3 percent per annum in six months for the first 23 customers each month who borrow loans with secured assets (home loans, car loans, consumer loans, business loans), and in three months for the first 23 customers each month who borrow unsecured loans, said OCB’s general director Nguyen Dinh Tung.
Caution needed when cutting interest rates
Talking to Dau tu Chung khoan, general director of NamABank Tran Ngoc Tam said that with the preferential interest rate package for green credit, the bank expects to contribute to businesses and individuals developing sustainable business associated with environmental protection. However, in fact, the capital disbursement has been stopped for many projects which adversely affected the environment during the project implementation. This has caused businesses to suffer losses and at the same time made banks to face risks in debt recovery.
According to Bao Viet Securities Company (BVSC), the recent decrease in interest rates has helped banks lend more, increase capital supply and solve the capital needs of people and businesses.
However, the actual impact is not large, because the reduction is not much and the spread mainly takes place in some priority areas as prescribed by the government, instead of the entire customer segments. The lending capital is mainly short term instead of medium and long term. For consumer segment, the lending interest rates are only preferential for a short time, after that an amplitude of three to four percent per annum will be added, which means that the real interest rates can reach up to 13-14 percent per annum.
BVSC said that in the near future, the interest rate level in Vietnam can only be lowered in some priority areas. Therefore, it is difficult to set up a new interest rate level which is lower than the current one.
Sharing similar point, economic expert Dr Vo Tri Thanh said that the output interest rates can hardly fall significantly in the context when input costs of banks remain high. At a different perspective, Dr Can Van Luc, a banking and finance expert said that banks’ interest rate reduction will support people, businesses but also impose consequences. Accordingly, the credit growth target of 14 percent may not be achieved if not strictly controlled, at the same time. At the same time, it will affect the target of macroeconomic stability because lowering interest rates also makes the capital supply to increase, causing inflation pressure to rise. Not to mention, lowering interest rates will also affect banks’ profits. “These factors need to be noted, especially in the context when oil prices and prices of some goods managed by the State are still on an increase roadmap,” Dr Luc recommended.
