Central bank signals no rate hike, continues support policies this year

A digital banking kiosk of Agribank. The central bank will focus on ensuring adequate capital for the economy while also keeping bad debts from rising. — VNA/VNS Photo Trần Việt

HÀ NỘI — Deputy Governor of the State Bank of Việt Nam (SBV) Đào Minh Tú said at the press conference on Wednesday that the central bank will not consider increasing operating rates and might extend debt rescheduling policies to support enterprises this year.

“Interest rates have dropped to the lowest level in the past 20 years. Commercial banks say that rates cannot be lower, but the central bank urges efforts to reduce costs to create room for supporting the economy,” Tú said.

The central bank will manage rates in the direction of not increasing operating costs, and based on global economic development and major macro balances, he said.

Cutting operating rates four times by 0.5-2 per cent allowed reductions of around 2 per cent per cent in deposit and lending rates compared to the end of 2022.

As of the end of 2023, lending rates for prioritised sectors were reduced to below 4 per cent per year and the average deposit rate was 3.5 per cent per year. The average lending rate for new loans was 6.7 per cent.

The credit growth rate was 13.5 per cent in 2023, not achieving the target of 14-15 per cent but still positive in the context of economic difficulty, Tú said.

The monetary market was kept stable while inflation was under control in 2023.

The Vietnamese đồng depreciated by 2 per cent, a very low level compared to the depreciation of other currencies, by 12-17 per cent of G7 member countries, for example.

Forecasting that the economy would continue struggling this year, the central bank will consider extending Circular 02 on debt rescheduling and retention of debt category to assist in difficulties in 2024, Tú said.

The focus of the central bank will be on ensuring adequate capital for the economy but also keeping bad debts from rising.

Besides, the handling of weak banks will be strengthened in 2024, with greater determination, Tú said, adding that zero- Vietnamese đồng and under-special control banks, including Sài Gòn Joint Stock Commercial Bank (SCB), are in stable operation and gradually being restructured. Steps will be raised to gradually handle SCB.

15% credit growth target for 2025

The central bank has set a credit growth target of 15 per cent for the domestic banking system in 2024.

The target can be adjusted depending on developments of the real situation, the central bank said in a document sent to credit institutions.

The SBV requested credit institutions to provide loans in a safe manner and in line with their risk management capacity, liquidity and ability to mobilise capital, while preventing bad debts from rising.

They are also banned from providing preferential interest rate loans for executives and their relatives, businesses within their ecosystems and “backyard” companies.

The central bank said that it will closely monitor actual developments to manage credit growth in a proactive, flexible, prompt and effective manner. It will also adjust the credit growth target and proactively revise credit growth quotas given to each credit institution.

Tú estimated that with a growth target of 15 per cent, around VNĐ2 quadrillion (US$81.8 billion) will be pumped into the economy in 2024.

SBV asked that credit flow prioritise production and business and sectors which create growth momentum, such as investment, consumption and export, together with strict management of credit flow into risky sectors.

In addition, SBV will speed up the digital transformation of the banking system with a focus on ensuring security and safety. — VNS