Decision 313/QD-NHNN: Shall the current refinancing rate remain and the operating interest rates be reduced simultaneously in Vietnam?
Shall the current refinancing rate remain and the operating interest rates be reduced simultaneously in Vietnam?
On March 14, 2023, the State Bank of Vietnam issued a statement adjusting some types of operating interest rates to support the economy.
Over the past time, the global economic outlook has been uncertain, and inflation in many countries continues to remain high; Domestic economic growth is still difficult, and many macroeconomic indicators increased lower than in the same period.
However, in that context, inflation in our country is controlled, and credit institutions and foreign bank branches (credit institutions) have also made efforts to reduce costs and reduce the mobilization interest rates. Therefore, to continue implementing the guidelines of the National Assembly, the Government of Vietnam in removing difficulties for the economy, and reducing loan interest rates for enterprises and people, the State Bank of Vietnam (SBV) decided to adjust the interest rates. To be specific:
In Decision 313/QD-NHNN in 2023, the SBV adjusted the rediscount rate to reduce from 4.5%/year to 3.5%/year;
Overnight rate for inter-bank electronic payment and interest rate for loans for covering the capital shortfall regarding clearing of the State Bank of Vietnam for credit institutions and foreign bank branches: 7,0%/year are reduced from 7.0%/year to 6.0%/year.
Particularly, the refinancing rate shall remain at 6%/year as prescribed in Decision 1809/QD-NHNN dated October 24, 2022, as follows:
Regulations on interest rates of the State Bank of Vietnam are as follows:
1. Refinancing rate: 6,0%/year.
What are the purposes of the State Bank of Vietnam to refinance loans for commercial banks?
Pursuant to Article 4 of Circular 24/2019/TT-NHNN, SBV refinances loans in the form of on-lending on credit institution’s credit-related documents to meet the following purposes:
- Supporting credit institutions in paying deposits to personal and corporate customers (including other credit institutions, and foreign bank branches), and repaying borrowed funds to other credit institutions or foreign bank branches (hereinafter referred to as liquidity support).
- Providing financial support for loans granted to industries or sectors that Government’s Decrees prescribe that SBV provides with support policies through monetary policy tools (hereinafter referred to as loan support for promoted sectors or industries).
Previously, on March 7, 2023, the Government of Vietnam issued Resolution 31/NQ-CP 2023 at the Government’s Regular Meeting in February 2023.
Accordingly, the Government assigns the State Bank of Vietnam to take charge of, and coordinate with agencies and localities in, operating certain, proactive, flexible, and effective monetary policy tools; closely coordinate and synchronize with fiscal and other policies, contributing to maintaining macroeconomic stability, controlling inflation, stabilizing the currency and foreign exchange markets, and promoting growth.
At the same time, it is required to reduce loan interest rates, and increase the access to capital of people and enterprises, ensuring reasonable, effective interest rates in accordance with inflation control requirements.
What are the requirements satisfied by commercial banks to be refinanced loans by the State Bank of Vietnam?
(1) For refinancing to support liquidity:
According to Article 12 of Circular 24/2019/TT-NHNN on conditions for refinancing to support liquidity:
SBV shall consider issuing its decision on refinancing and extension of refinancing in the form of on-lending on credit-related documents to credit institutions fully meeting the following conditions:
- They are facing solvency difficulty and are not going into special administration.
- They have undertaken that they do not have or have already used up valuable papers mentioned in the list of valuable papers accepted for use in SBV's transactions as of the date of submission of their application forms for refinancing or refinancing extension and that loans mentioned in checklists of credit-related documents (i.e. checklists of loans referred to in Appendix No.03 issued with Circular 24/2019/TT-NHNN) for refinancing or refinancing extension purposes meet standards stipulated in Article 13 of Circular 24/2019/TT-NHNN in full.
(2) For refinancing to support loans to promoted industries and sectors:
According to the provisions of Article 16 of Circular 24/2029/TT-NHNN on conditions for refinancing to support loans for promoted industries and sectors
SBV shall consider issuing its decision on refinancing in the form of on-lending on credit-related documents to credit institutions fully meeting the following conditions:
- They are not going into special administration or subject to early intervention regimes or measures against violations as prescribed in Article 11 of Circular 24/2029/TT-NHNN.
- They comply with prudential ratios prescribed in clause 1 of Article 130 in the (amended and supplemented) Law on Credit Institutions, and follow SBV’s instructions, within 12 consecutive months before the date of submission of their Applications for refinanced loans.
- They have undertaken that they do not have or have already used up valuable papers mentioned in the list of valuable papers accepted for use in SBV's transactions as of the date of submission of their application forms for refinancing and that loans mentioned in checklists of credit-related documents required for refinancing meet standards stipulated in Article 18 of Circular 24/2029/TT-NHNN in full.
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