HÀ NỘI — Governor of the State Bank of Vietnam (SBV) Phạm Đức Ấn on Monday chaired a meeting with credit institutions, urging them to cut interest rates to support businesses and help achieve double-digit economic growth targets.

Speaking at the meeting, the Governor said that the SBV issued Official Dispatch No. 9608/NHNN-CSTT last weekend, outlining operational solutions for credit institutions. The directive underscores a commitment to achieving double-digit economic growth while prioritising monetary security and the systemic safety of credit institutions.

“The banking system serves as the ‘lifeblood’ of the economy. If the lifeblood is compromised, the entire body cannot remain healthy," he said.

"Therefore, maintaining the stability of the banking system and ensuring macroeconomic safety are essential for reaching double-digit growth targets."

Providing an update, the Governor said that as of the end of last week, funds mobilised by the banking system had increased by 11.22 per cent, while credit had expanded by 11.44 per cent.

High credit growth has resulted in a significant gap between Vietnamese đồng-denomination outstanding loans and mobilised funds. However, this gap, which at one point had reached nearly VNĐ2 quadrillion (US$75.75 billion), has since narrowed to below VNĐ1.5 quadrillion, signalling a notable improvement in capital mobilisation.

Another positive development in monetary policy management is the stability of the exchange rate. Despite significant volatility in the global economy, the đồng has remained stable, standing out as one of the more resilient currencies both regionally and globally.

This serves as a foundation for investors, including foreign ones, to maintain their confidence in pouring capital into Việt Nam. The strong disbursement of foreign direct investment (FDI) capital during the first nine months of the year is evidence of this, with currency stability playing a key contributing role.

Regarding interest rates, the Governor noted that many nations, particularly in the European Union and the US, have faced significant pressure, compelling them to raise interest rates to curb inflation.

In managing its monetary policy, he said Việt Nam must continue to strike a balance between the need for macroeconomic stability and the requirement to provide substantive support for economic growth.

Ấn added that the SBV has repeatedly instructed commercial banks to balance support for the economy with the need to ensure operational safety, specifically by preventing unhealthy competition over deposit interest rates.

In this spirit, the SBV issued Official Dispatch No. 9608/NHNN-CSTT, requiring credit institutions to reduce their listed deposit interest rates by at least 0.5 percentage points per annum for deposits with terms of six months or longer. Simultaneously, they are expected to focus on lowering lending rates by 1.5-2 percentage point per annum for production and business activities and priority sectors.

Under the dispatch, alongside the requirement to lower interest rates, the SBV noted that credit growth must be managed safely and effectively, ensuring that capital flows are directed toward production, business activities, priority sectors, and key drivers of economic growth.

Credit institutions are urged to increase funding for key, viable projects and initiatives, as well as for priority sectors such as science and technology, innovation, digital transformation, and the green transition.

However, the SBV strictly prohibits lowering credit standards or compromising credit quality for the sake of expanding loan portfolios.

Banks must also ensure a proper balance between capital raising and lending, while effectively managing liquidity risks and maturity mismatches.

Under the dispatch, it was noted that the State Bank of Vietnam may consider reducing credit growth quotas for the remainder of 2026 and assign lower credit growth quotas to those banks that violate interest rate regulations for 2027.

Furthermore, the SBV may require such credit institutions to maintain one or more prudential ratios at levels higher than the standard regulatory requirements.

Beyond interest rate matters, the dispatch also requires banks to exercise strict control over credit extended to high-risk sectors, as well as to individual clients or groups of clients with large outstanding debt.

Banks are also expected to strengthen monitoring of loan utilisation, collateral valuation and overall credit portfolio quality.

In particular, the SBV calls for close monitoring of debts requiring special attention, non-performing loans, restructured debts, and accrued interest income. Institutions must ensure accurate debt classification and adequate provisioning, strictly avoiding the concealment of bad debts or delays in recognising credit risks.

At the meeting, the Governor also noted that for a meaningful reduction in lending rates, credit institutions must simultaneously lower operating costs, accept lower profit margins, and reduce the costs of raising capital. Since interest paid on deposits is a major component of banks' funding costs, maintaining high deposit rates would make it difficult to justify lowering lending rates.

However, he noted: “Rate reductions should not be applied uniformly; rather, they must be targeted toward the right recipients, specifically those in production, business, and priority sectors. The policy should also apply to both existing outstanding loans and new loans, thereby easing the financial burden on operating enterprises while supporting their capital needs for production and business operations.”

He affirmed that the SBV will continue to support credit institutions in implementing appropriate solutions to overcome challenges, without compromising the safety of the banking system.

At the meeting, banks agreed to lower deposit interest rates, cut costs, and share a portion of their profits in order to reduce lending rates, with a focus on supporting production, business activities and priority sectors. — BIZHUB/VNS