Credit growth in the first six months was low due to low demand for capital from the economy due to the impacts of Covid-19 pandemic. (Photo: SGGP)
From after the Covid-19 pandemic to now, the banking industry has reduced deposit interest rates for three consecutive times. From July 2, at many banks, the deposit interest rates for below-six-month terms were from 3.9 percent to 4.05 percent per annum and the highest interest rate for a 13-month term was around 7.8 percent per annum. Not only the interest rates on the market between commercial banks and organizations and individuals, but the interbank interest rates also dropped steeply, showing that the liquidity of banks was plentiful. Therefore, many banks have offered many loan packages with preferential interest rates for enterprises and individuals to pump money to the market.
Particularly, after setting aside VND1 trillion with preferential interest rates from 6 percent per annum to help enterprises recover and develop business after the Covid-19 pandemic, Sacombank has recently added VND10 trillion to the capital source with interest rates only from 6.5 percent per annum for business loans for individuals, and 7.5 percent per annum for home, car, and consumer loans.
Similarly, besides policies to reduce the lending interest rate by up to 2.5 percent per annum for customers who are enterprises affected by the pandemic, Vietcapital Bank has also put aside VND6 trillion to give loans to help enterprises to recover after the pandemic.
However, Mr. Phan Dinh Tue, Deputy CEO of Sacombank, said that although his bank lowered the lending interest rates by 0.5-1 percent per annum for new customers after the pandemic, as well as offered preferential credit packages for customers, it was still difficult for the bank to disburse because there were no borrowers as the demand for the capital of customers declined.
The State Bank has also required non-credit institutions to reduce input interest rates to reduce costs, and create conditions to lower lending rates to support the economy. In the context that the demand for loans decreased strongly, the banking system does not lack capital, so many banks have endured tightening their belts to cut the lending rates further.
According to Vietinbank, in 2020, the bank pledges to spend about VND3-4 trillion from its profit reduction to support interest rates, reduce fees, accompany, and share difficulties with customers although this will directly affect its profit target.
Similarly, Mr. Nghiem Xuan Thanh, Chairman of Vietcombank’s Board of Directors, said that in early this year, Vietcombank set a pre-tax profit target of over VND26.6 trillion with an expectation of credit growth of more than 14 percent. However, due to the impacts of the Covid-19 pandemic, the bank had to revise its credit growth plan to restructure debts for its customers, reducing 10 percent of the total interest payments for customers affected by the pandemic. The amount of money that must be cut was VND2.24 trillion, equal to the profit of a small and medium-sized joint-stock bank.
Sacombank has also restructured about VND10 trillion of outstanding loans for customers affected by the Covid-19 pandemic, however, only about 50 percent of the outstanding loans were met and the bank will continue to restructure, reduce/reschedule debts for customers in the future. Sacombank also had to adjust its profit by 20 percent or 40 percent lower than the plan. However, if the pandemic is controlled well, banks are expected to make every effort to achieve a profit plan equal to last year.
2020 is a difficult year for the banking industry. The target for a credit growth of the banking industry in 2020 is at 14 percent. But in the last six months, the credit growth of the whole industry was only at 3.26 percent. In the last six months of the year, amid the current market situation, the demand for the capital of customers sharply decreased due to the impacts of the pandemic, the credit will be unlikely to increase highly.
Nevertheless, Mr. Le Minh Hung, Governor of the State Bank of Vietnam, affirmed that the credit institution system has and will closely follow the goal of operating monetary policy to maintain macroeconomic stability and support economic growth. The State Bank is willing to increase the credit limit for credit institutions to support economic growth.
As of June 22, foreign credit institutions, financial companies, and banks have restructured the repayment term for more than 258,000 customers, with nearly VND177 trillion of outstanding loans; exempted, reduced, lowered interest rates for over 421,000 customers, with a total debt of over VND1.26 quadrillion; provided new loans with preferential interest rates with accumulated loan sales from January 23 up to now reaching VND1.13 quadrillion to more than 238,000 customers, with interest rates lower than the common interest rate by 0.2-2.5 percent per annum compared to before the pandemic.
By Nhung Nguyen – Translated by Bao Nghi
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