In this interest rate cut, banks said they will focus on businesses that are heavily affected by the pandemic. The deadline for reducing interest rates will be from July until the end of 2021.

Banks met with the Bankers Association to agree on a plan to reduce interest rates.

Should not support raking

On July 12, the Banking Association met with member credit institutions to discuss and agree on the method and time to reduce lending interest rates for existing loans in the last five months in 2021 under the direction of Deputy Governor of the State Bank (SBV) Dao Minh Tu.

At the meeting, representatives of banks all said they have supported customers with restructuring and debt relief measures, helping to ensure credit sources so customers can have enough cash flow in their business during difficult times. The group of priority sectors has a lending interest rate of less than 4.5% per year and for essential economic sectors, the lending interest rates are around 6-7%.

Nguyen Viet Manh, Member of Agribank's Board of Members, said on July 12, Agribank's Board of Directors met to propose a reduction in interest rates, some of which will be reduced by 0.5%, there will be a decrease of 2-2.5%, which means an average decrease of 1% compared to the current level.

Therefore, it is agreed to reduce interest rates to support customers, but Pham Quang Thang, Deputy General Director of Techcombank, said in support, it should not be levelled but should focus on supporting essential manufacturing enterprises with many workers. As for real estate businesses that are making big profits, export businesses or individuals who borrow money to buy cars, they should not enjoy interest rate cuts.

According to Pham Thi Trung Ha, Deputy General Director of MB, customers who need low interest rates have already enjoyed them, so in the immediate future, MB will support businesses that have difficulty with no revenue or revenue reduction, for example, businesses in accommodation, services with interest rates reduced by 1% or more.

Banks will lose VND trillions of profit

Besides the solutions were mentioned above, at the meeting, some said that to reduce interest rates, banks will also have to consult shareholders, due to reducing interest rates, the profit plan of the bank will be greatly affect this year.

Phan Dinh Tue, Deputy General Director of Sacombank, said Sacombank's total outstanding loans are about VND 350 trillion; if the interest rate is reduced by 1% within 5-6 months, the bank's profit will also decrease by more than VND one trillion, equivalent to 40% of the planned profit. Tue wondered if shareholders would accept this decrease.

Similarly, a representative of BIDV also said that reducing the interest rate at 1%, BIDV's profit in 2021 will decrease by VND trillions. Or with LienvietPostBank, if this bank reduces the interest rate by 1% per year on average, the profit will decrease by about 600 VND billion.

Therefore, banks suggested the SBV grant more credit room in the last months of the year so they would have more credit to support customers better.

Nguyen Thanh Tung, Deputy General Director of Vietcombank, said that at the beginning of the year, Vietcombank was assigned a credit target of 10%, but so far, credit has grown by 9%. Therefore, to continue to support customers to overcome the current difficulties, Vietcombank desperately needs the SBV to loosen the credit room in the last months of the year.

Pham Thanh Ha, Director of the Monetary Policy Department - SBV said that the SBV knows the size and capacity of each bank is different, so the level of interest is different. Customer support is different. However, he called for see specific support numbers so that the market knows which groups/industries/sectors banks have supported, even customers, so all can see that the sharing and side-by-side of the banking system is quick and substantive.

Nguyen Quoc Hung, General Secretary of the Banking Association also said that while supporting businesses and the economy to overcome difficulties, banks still have to ensure system safety.