Banks unexpectedly cut lending rates to aid businesses

State-owned banks, including VietinBank, offer new preferential interest rates for short-term loans from today. - Photo VietinBank

Le Duc Tho, VietinBank’s chairman, said this is the second time banks have cut lending rates this year to follow up on the Government’s instruction to support domestic production and businesses, contributing to promoting the country’s economic growth.

Under the move, State-owned banks, including Agribank, VietinBank, Vietcombank and BIDV have reduced the rate by 0.5-1 percentage points per year for loans to firms in the Government’s priority sectors.

BIDV has applied the new maximum rate at 5.5 per cent per year, down 1 percentage point against the cap regulated by the central bank, from August 1 until the end of the year. The rate cut is offered to priority businesses in the fields of export, supporting industries and advanced technology.

BIDV has launched two preferential credit packages worth a combined VND70 trillion (US$3 billion), with an interest rate cut by 0.5 percentage point per year versus last month’s rate. Of which, the first credit package is worth VND60 trillion for small- and medium-sized firms, and the short-term package is worth VND10 trillion for micro firms and start-ups.

Vietcombank has also applied interest rates for Vietnamese dong short-term loans at a maximum of 5.5 per cent per year, dipping 1 percentage point against the central bank’s ceiling rate. The rates are applicable to old and new loans taken out by borrowers in priority sectors.

A Vietcombank representative said that the interest rate reduction is being applied on a wide scale, with loans enjoying rate cuts accounting for 38 per cent of the bank’s current funding for short-term loans and 20 per cent of its total outstanding loans in dong.

Aside from State-owned commercial banks, domestic joint stock banks have joined the provision of preferential rates. According to Techcombank, customers who are retailers, small and medium-sized firms are subject to its preferential interest rates.

This is the second time year-to-date that local banks have lowered lending rates to support corporate customers. Early this year, four State-owned commercial banks – Vietcombank, Vietinbank, BIDV and Agribank – reduced their rates by 0.5 percentage point for firms in the priority sectors, including agriculture businesses, firms producing goods for export, small- and medium-sized enterprises, enterprises operating in auxiliary industries and high-tech enterprises including start-ups.

Experts said the lowering of lending rates was a sudden move, especially as deposit interest rates have continually been revised upward recently.