HCM CITY — Vietnamese banks have begun cutting deposit rates following a central bank directive, but borrowing costs remain high, raising questions about how quickly businesses and households will benefit from cheaper credit.

As of October 22, over 20 banks had reduced deposit rates, according to local media reports. However, lending rates have yet to fall significantly, with many lenders continuing to rely on preferential loan packages rather than broad-based cuts.

At a meeting with representatives of 46 credit institutions on Monday, Phạm Đức Ấn, governor of the State Bank of Vietnam (SBV), called on banks to reduce lending rates by 1.5-2 percentage points a year for production, business activities and priority sectors.

Banks were also asked to cut deposit rates by at least 0.5 percentage points for terms of six months or longer.

In a dispatch issued on October 21, the central bank said it would monitor average interest rates on new transactions during the final months of 2026. Banks that failed to comply could face lower credit growth targets.

Figures reported by banks at the end of September show significant differences in borrowing costs across the banking system.

Among joint-stock commercial banks, OCB reported an average lending rate of 11.38 per cent for individual customers, followed by TPBank at 11.03 per cent and BVBank at 11 per cent.

Average lending rates at LPBank, Bac A Bank and VietABank ranged from 10.2 to 10.8 per cent, while rates at VIB, ACB, PVcomBank, KienlongBank, MSB and Saigonbank stood between 9 and 9.8 per cent.

State-owned lenders offered lower average rates, with BIDV reporting 7.73 per cent and Agribank 8.42 per cent.

Actual borrowing costs vary according to loan purpose, creditworthiness, collateral and repayment terms. The figures nevertheless highlight the challenge facing businesses seeking affordable credit.

Funding costs remain a challenge

Banking expert Nguyễn Trí Hiếu said interest rate stability depended on credit growth being aligned with banks’ ability to mobilise deposits, maintain capital strength and manage risks.

Rapid lending growth, particularly in medium- and long-term loans, would increase pressure on banks to secure funding with appropriate maturities, he said.

By October 14, outstanding credit across the economy had reached nearly VNĐ21 quadrillion, up 11.44 per cent from the end of 2025 and almost 17 per cent year on year.

Individual bank deposits totalled about VNĐ11.43 quadrillion in September, up 10.63 per cent from the end of last year, while corporate deposits stood at around VNĐ6.34 quadrillion.

Nguyễn Đức Độ, deputy director of the Institute of Financial Economics at the Academy of Finance, said high funding costs remained a major obstacle to lowering lending rates.

If banks cut lending rates before their deposit costs fell sufficiently, their profit margins could narrow, making them more cautious about extending credit, he said.

Độ also warned that sustained credit growth above nominal GDP growth could put pressure on funding, as household deposits ultimately depend on rising incomes.

He suggested that the government consider transparent interest subsidies funded by the state budget to help businesses access cheaper loans.

Banks should also prioritise production and business activities, reduce operating costs and share part of their profits with borrowers, he said.

The central bank’s latest measures signal a stronger push to translate lower funding costs into cheaper credit.

However, the impact will depend on whether banks reduce rates across their loan portfolios rather than limiting support to selected customers and lending programmes.

Preferential packages can provide targeted relief, but smaller firms and businesses outside priority sectors may continue to face high borrowing costs.

The central bank’s monitoring of average rates on new transactions should help show whether the measures are working.

For now, deposit rate cuts at 22 banks mark an initial response. The key test will be whether businesses can secure cheaper loans more widely in the coming months without undermining banks’ liquidity or credit quality. — VNS