BANKS AGREE TO CUT LENDING RATES TO SUPPORT HARD-HIT BUSINESSES

Most banks have agreed to cut the lending rate for enterprises hard hit by the COVID-19 pandemic from this month until the end of this year.

This consensus was reached during a meeting of 16 banks with the State Bank of Việt Nam on Monday.

The COVID-19 pandemic is having a negative impact on Việt Nam’s economy and has forced many enterprises to suspend production or close entirely.

“Techcombank agrees to reduce interest rates to support customers,” said Phạm Quang Thắng, deputy CEO of Techcombank.

Thắng said, to date, the bank had spent more than VNĐ100 billion (US$4.3 million) on activities to support the community amid the pandemic under the direction of the Government and the banking industry.

Since last year, Techcombank had continuously cut lending rates for priority sectors to below 4.5 per cent per annum, for essential economic sectors to about 6-7 per cent per year. The bank would focus on supporting labour-intensive enterprises and those essential for the economy.

“As for real estate businesses and exporting businesses which earned big profits or individuals who borrow money to buy cars, they should not be the subject of interest rate support,” Thắng said.

Nguyễn Viết Mạnh, a member of Agribank’s board of members, said Agribank also agreed to cut interest rates to support businesses. The bank’s leaders would meet to discuss the reduction rate but the average lending rates would decrease by about 1 per cent, some loans could enjoy a drop of 2-2.5 per cent.

Meanwhile, deputy general director of Military Bank Phạm Thị Trung Hà said the bank would support businesses directly affected by the pandemic, whose revenues declined steeply, such as companies in the fields of tourism, accommodation and services with an interest rate cut of 1 per cent or higher.

"However, MB will base on its customer database to select businesses in more difficulty, thereby having an appropriate interest rate support policy," Hà said.

Lower profits

Some banks said they would consult shareholders as cutting interest rates would affect their profit plans this year.

A representative of BIDV said a cut of 1 per cent in lending rates would decrease its profit by trillions of đồng this year.

Meanwhile, LienVietPostBank’s representative said with the bank’s total outstanding loans of about VNĐ191 trillion ($8.23 billion), if it reduced lending rates by 1 per cent, its yearly profit would decrease by about VNĐ600 billion.

Nguyễn Hồng Quân, deputy general director of TPBank, said banks were ready to share difficulties with enterprises and accept lower profits.

At the meeting, banks also asked the central bank to lift the credit limit in the last months of this year so that they would have more room to support customers.

Nguyễn Thanh Tùng, deputy CEO of Vietcombank, said the bank had maintained low interest rates since the beginning of the year with the average short-term lending rate at around 6 per cent per year and long-term rate 8 per cent per year.

“At the beginning of the year, Vietcombank was assigned a credit target of 10 per cent, but so far, credit has grown by 9 per cent. Therefore, to continue to support customers, Vietcombank urgently needs to have higher credit 'room' in the last months of the year,” Tùng said.

Loosening credit limits was also recommended by commercial banks such as SHB, TPBank and LienVietPostbank.

Phạm Thanh Hà, director of the central bank’s Monetary Policy Department, highly appreciated the consensus of banks in reducing interest rates to support enterprises. However, he noted that banks should be flexible in reducing interest rates, depending on their health to have an appropriate reduction.

General Secretary of Vietnam Bankers Association Nguyễn Quốc Hùng also said banks still had to ensure the highest level of system safety due to the negative impacts of the global financial crisis. The pandemic's impact on the banking industry would have a time lag, so they needed to prepare solutions for themselves.

“Currently, the banking industry shares difficulties with businesses, but in the future, when bad debts increase due to the pandemic, who will share with the banking industry? Therefore, support must be in the spirit of ensuring system safety," Hùng said.

He also proposed the State Bank consider assigning annual credit quotas, especially for the banks that have applied Basel II and Basel III which should be given priority in setting credit limits.

Source: VNS