The State Bank of Vietnam (SBV) recently instructed credit institutions to actively cut costs and balance their resources to roll out lending programs targeting key drivers of economic growth and small- and medium-sized enterprises (SMEs).

Under the central bank’s guidance, preferential VND lending rates under these programs must be at least 1 percentage point per year below each bank’s average lending rate for loans of the same tenor at the relevant time.

Priority borrowers include SMEs, businesses and individuals engaged in production and trading in sectors such as agriculture, supporting industries, high technology, exports, the digital economy, artificial intelligence, semiconductors, processing and manufacturing, and green projects.

The policy is part of efforts to channel credit towards sectors seen as drivers of growth rather than expand lending indiscriminately.

Banks race to cut lending rates

Soon after the SBV’s directive, a number of banks began announcing rate cuts or launching additional preferential lending packages.

From Wednesday, Nam A Bank cut lending rates by 0.5-0.7 percentage points a year for individual customers taking loans for production, business and agriculture. Rates on home loans and consumer loans for living expenses were reduced by 0.1-0.3 percentages points.

For corporate customers, the bank cut listed lending rates by up to 0.5 percentage points, with a total credit limit of VND25 trillion ($959.23 million).

Notably, to create more room to lower lending rates, Nam A Bank also cut deposit rates by up to 0.3 percentage points.

BVBank also launched a VND2.5 trillion ($95.92 million) credit package for SMEs and household businesses from Wednesday, with rates starting at 9.7% a year, at least 1 percentage point below normal lending rates. The bank said it would also simplify appraisal process and procedures to speed up disbursement.

Earlier, National Citizen Bank (NCB) announced a 0.5-percentage-point cut in lending rates for individual and corporate customers from Tuesday. Preferential rates for individual customers start at 8.49% a year, while SMEs can access short-term loans from 10% a year for the first three months. For large companies operating in supply chains or business ecosystems, the lowest rate starts at 10.45% a year.

The trend is not limited to private-sector banks. State-controlled commercial banks are also taking part.

Agribank has launched a VND70 trillion ($2.69 billion) lending package, while BIDV, VietinBank and Vietcombank have each allocated VND50 trillion ($1.92 billion). The four major banks have therefore announced preferential credit packages worth a combined VND220 trillion ($8.44 billion).

The packages are mainly aimed at SMEs, businesses and individual borrowers in priority sectors and areas identified as growth drivers, with lending rates at least 1 percentage point below the average rate for loans of the same tenor.

Agribank is offering cuts of 1-2 percentage points a year under a program launched in August 2026.

The simultaneous rate cuts by multiple banks show that efforts to support growth are being transmitted relatively quickly into the credit market. Behind the race to lower lending costs, however, lies a notable paradox: funding costs across the banking system have yet to become genuinely cheap.

Not yet a sign of “cheap money” cycle

A “cheap money” cycle cannot be identified simply by the emergence of multiple preferential lending packages. More important is whether the banking system’s overall funding costs fall sufficiently to bring down ordinary lending rates across the market.

In recent months, banks have continued to face considerable pressure to mobilize funds. Alongside relatively high listed deposit rates, the market has continued to see higher rates offered for certain tenors, products or conditional programs.

As of July 23, the average online deposit rate among 36 banks was around 6.16% a year for six-month deposits and 6.39% for 12-month deposits. This shows that while lending rates are being pushed down, banks’ funding costs have not fallen at the same pace.

One important factor is the gap between credit growth and deposit growth. When lending expands faster than deposits, banks must compete to retain and attract capital, limiting their ability to significantly reduce deposit rates.

This is also the key distinction between targeted lending-rate cuts and a genuine cheap-money cycle.

Under current conditions, banks can proactively lower rates for certain groups of borrowers or sectors to support credit-growth targets. But if funding costs do not fall accordingly, cutting lending rates will put direct pressure on net interest margins (NIMs).

In other words, banks must choose between accepting lower profit per VND lent and finding ways to reduce funding costs further.

The fact that some banks are cutting deposit rates at the same time suggests that this adjustment has begun, but it is unlikely to move quickly if competition for deposits remains strong across the system.

This is also why lending-rate cuts in the coming period are likely to be more selective than broad-based.

Banks will prioritize borrowers with strong credit profiles, solid repayment capacity, extensive use of banking products and services, or exposure to sectors identified as growth drivers. Lower credit risk gives banks more room to offer lower rates.

By contrast, for ordinary loans or borrowers carrying higher risk, the scope for rapid rate cuts will remain limited if funding costs have yet to ease meaningfully.

In the short term, SMEs and businesses in priority sectors are therefore likely to be the clearest beneficiaries. A rate reduction of around 0.5-1 percentage point a year can make a significant difference for large loans, particularly as financing costs continue to directly affect corporate profit margins.

For the economy as a whole, however, the simultaneous rate cuts announced by multiple banks do not mean cheap money has returned.

The key signals to watch in the final months of the year are not only how much further banks cut lending rates, but also whether deposit rates begin a sustained decline and whether the gap between credit growth and deposit growth narrows.

If funding costs genuinely ease, banks will have more room to reduce lending rates, potentially extending the cuts from preferential packages to ordinary loans.

But as long as banks continue to compete aggressively for deposits, the current rate-cutting race will remain primarily a competition for high-quality borrowers and an effort to direct credit towards growth drivers, rather than the return of a broad-based “cheap money” cycle.