Banking industry with effective credit solutions among Covid-19 pandemic

17:17-28/09/2021

Under the negative impacts of the COVID-19 pandemic, over the past time, following the directions of the National Assembly, the Government and the Prime Minister, the State Bank of Vietnam (SBV) and the whole system of credit institutions have proactively and drastically conducted multiple credit support solutions, reduced the lending interest rates with the banking sector's own resources in order to help resolve the difficulties in production and business activities, contributing to the inflation control, maintaining the macro-economic stability and supporting the economic growth.

 

SBV headquarters

Accordingly, the SBV has thrice cut down the key interest rates, with the total reduction of 1.5-2.0% p.a.; reduced the cap for the mobilizing interest rates by 0.6-1.0% p.a. for below 6-month term deposits; reduced the cap for the lending interest rates by 1.5% p.a. on short term loans for the priority sectors and fields (currently at 4.5% p.a.); ensured readiness to provide liquidity support for the credit institutions; created favorable conditions for the credit institutions to access the SBV's financial resources at a lower cost, thereby helping to reduce the lending interest rates to support the COVID-affected customers to restore their production and business operations. The common lending interest rates decreased by about 1% p.a. in 2020, and have continued to be reduced during the first half of 2021 with a decrease of about 0.55% p.a.

Implementing Resolution No.63/NQ-CP of the Government, 16 commercial banks (accounting for 75% of the total loan outstandings of the economy), through Vietnam Banks’ Association (VNBA), have agreed in the principle to cut down further on the lending interest rates of the existing loan outstandings by up to 1% p.a. during the last five months of 2021 for COVID-affected customers. Accordingly, these 16 banks have agreed to reduce their lending interest rates, which are applicable from July 15, 2021 to the end of 2021, with the total reduced interest amount estimated at VND 20,613 billion. Particularly, four State-owned commercial banks have committed to a VND 4 trillion support package through reducing their lending interest rates and cutting down on banking service fees during the social distancing time (applicable for customers in areas applying strict social distancing measures in line with Directive No.16/CT-TTg of the Prime Minister).

By August 31, 2021, the credit institutions have exempted, reduced interest rates for over 1.13 million customers, with a total loan outstanding of over VND 1,580 trillion; provided new loans with lower interest rates compared to the pre-COVID time with an accumulated amount since January 23, 2020 of VND 4,460 trillion for 628,662 customers. According to the accumulated estimates from January 23, 2020 to August 31, 2021, the total amount of interest which has been exempted or reduced by the credit institutions for their customers is VND 26,000 billion, in which, the accumulated total amount of profit cuts as committed by the 16 banks from July 15, 2021 to August 31, 2021 is VND 8,865 billion, fulfilling 43.01% compared with their pledges.

Regarding credit management, the SBV has formulated the plan of credit growth targets for the whole year, with appropriate adjustments in line with the practical developments; regularly reviewed, considered to adjust the credit growth targets for each credit institution on the basis of the operational situation, the financial and governance capacity and the ability to extend credit in a healthy manner of each credit institution, with priority for those credit institutions having made lending interest rate reductions in order to help resolve the difficulties faced by the enterprises and the people.

By August 31, 2021, the credit outstanding for the whole economy had reached over VND 9,870 trillion, up by 7.42% as compared with that of the end of 2020; the credit for all economic sectors had registered higher growth rates than that of the same period in 2020. The credit growth for the priority fields and sectors had experienced a positive growth rate, in which the credit growth in agriculture and rural areas, export, support industries and hi-tech enterprises is much higher than the general credit growth rate.

In addition, the SBV has also issued Circular No. 01/2020/TT-NHNN dated March 13, 2020 and Circular No.03/2021/TT-NHNN dated April 2, 2021, which have created a legal framework for the credit institutions to reschedule the debt service, waived and reduced the interest and banking fees, maintained the debt classifications, helping to resolve many difficulties for those customers affected by the COVID-19 pandemic.

On September 7, 2021, the SBV issued Circular No.14/2021/TT-NHNN amending and supplementing a number of Articles of Circular No.01/2020/TT-NHNN, which extends the timelines for the solutions of debt rescheduling, waving and reducing interest and banking fees, and maintaining debt classifications in light of the complicated developments of the COVID-19 pandemic.

Moreover, the SBV has promptly issued guiding circulars and provided refinancing resources to the VBSP with the interest rate of 0% p.a. without requiring any collateral in order to provide credit to allow employers to pay work suspension benefits and wages to recover their production lines in accordance with the Government's Resolution No.68/NQ-CP (with a total amount of the package of VND 7,500 billion). By September 10, 2021, the SBV had disbursed and refinanced the VBSP with a total amount of VND 367.5 billion.

By September 17, 2021, the VBSP had approved 746 applications for loans sent in by business employers with a total amount of more than VND 392 billion in order to pay salaries and benefits for 112,397 employees. So far, the VBSP has disbursed VND 382 billion of credit to 730 employers in 63 cities and provinces.

From now until the end of the year and in the beginning of 2022, in order to continue to support the people and businesses and resolve the COVID-related difficulties, as well as to prepare for the post-COVID economic recovery, the SBV would continue to conduct the following measures:

Reasonable credit growth associated with improving the credit quality, focusing on the production and business areas, the priority fields and sectors; Controlling strictly the credit growth in potentially risky areas;

Monitoring and urging the credit institutions to implement Circular No.14/2021/TT-NHNN amending and supplementing a number of Articles of Circular No.01/2020/TT-NHNN on rescheduling debt service, waiving and reducing interest and banking fees, maintaining the debt classifications, with a view to providing more support to the businesses and people affected by the coronavirus outbreaks;

Directing the credit institutions to drastically implement their commitments to reducing the lending interest rates and banking fees for payment services; continuing to focus capital sources on meeting the demands for production and business operations in a timely manner, etc.;

Coordinating with the Ministry of Labor, War Invalids and Social Affairs to recommend to the Government and the Prime Minister to amend Resolution No. 68/NQ-CP and Decision No. 23/2021/QD-TTg, focusing on revising and easing the conditions for credit access in order to pay work suspension benefits and wages/salaries for recovery of production and business operations.

Communication Department