Does the State Bank of Vietnam reduce loan interest rates by 1-2% at the request of the Prime Minister of Vietnam in Announcement 231/TB-VPCP?
Does the State Bank of Vietnam reduce loan interest rates by 1-2% at the request of the Prime Minister of Vietnam in Announcement 231/TB-VPCP?
This is one of the requests of the Prime Minister set for the banking industry and stated in Announcement 231/TB-VPCP in 2024 on the Prime Minister's conclusion.
Specifically, in the remaining months of 2024, ministries, central and provincial authorities are required to focus on proactively, flexibly, promptly, and effectively managing monetary policies, closely synchronously and harmoniously coordinated with fiscal policies.
The State Bank of Vietnam shall take charge of and coordinate with ministries, provincial authorities, and related agencies in, managing interest rates in harmony, reasonable, and synchronous with exchange rate management and other monetary policy instruments.
In particular, it is required to focus on closely following developments, the world economic situation, and the management of monetary policies of central banks; working with state-owned commercial banks and large non-state commercial banks to direct and request the effective implementation of solutions for increasing access to credit by people and enterprises, continuing to reduce operating costs, enhance the application of information technology, digital transformation to continue striving to reduce loan interest rates by 1-2%, especially for traditional growth drivers, emerging industries, digital transformation, green transformation, circular economy, and social housing…;
Operating open market operations, money supply... in efficiency, flexibility, adhering to monetary policy objectives, ensuring liquidity and safety of the system of credit institutions and the economy;
Managing exchange rates flexibly to stabilize the foreign currency market, contributing to macroeconomic stability; proactively developing scenarios, and plans and responding to policies more promptly and effectively to fluctuations of domestic and foreign exchange markets.
Proactively and flexibly managing credit, suitable to macroeconomic developments, inflation, meeting capital demands for the economy, supporting the promotion of economic growth, and ensuring the safety of banking activities and the credit institution system;
Actively take credit growth solutions, direct credit to production, business, priority areas, and growth drivers; control credit for potentially risky domains, ensuring safety and efficiency.; be determined to have practical and effective solutions to strive for credit growth of the whole system until the end of the second quarter of 2024 at 5-6%.
Source: https://baochinhphu.vn/thu-tuong-chi-dao-dieu-hanh-dong-bo-chinh-sach-tai-khoa-chinh-sach-tien-te-thi-truong-vang-ty-gia-lai-suat-102240519072507214.htm
What is the current maximum loan interest rate in Vietnam?
Under the provisions of Article 468 of the 2015 Civil Code:
Interest rates
1. The loan interest rate shall be as agreed by the parties.
The loan interest rate agreed by the parties may not exceed 20% per year, unless otherwise prescribed by law. According to actual conditions and at the proposal of the Government, the Standing Committee of the National Assembly shall adjust the above interest and send report to the National Assembly at the latest session.
If the agreed interest exceeds the maximum interest prescribed in this Clause, the agreed interest shall become invalid.
2. Where parties agree that interest will be payable but fail to specify the interest rate, or where there is a dispute as to the interest rate, the interest rate for the duration of the loan shall equal 50% of the maximum interest prescribed in Clause 1 of this Article at the repayment time.
Thus, the loan interest rate agreed by the parties may not exceed 20% per year, unless otherwise prescribed by law.
In addition, Where parties agree that interest will be payable but fail to specify the interest rate, or where there is a dispute as to the interest rate, the interest rate for the duration of the loan shall equal 50% of the maximum loan interest rate.
For loan interest rates of credit institutions
A credit institution and its customer shall agree on the interest rate depending on capital demands and supplies on the market, loan demands, and creditworthiness of customers.
However, the maximum interest rates of short-term loans in Vietnamese Dong (VND) according to Clause 2 Article 13 of Circular 39/2016/TT-NHNN are stipulated in Decision 1125/QD-NHNN in 2023 as follows:
- Credit institutions and foreign bank branches (except for People's Credit Funds and microfinance institutions) shall grant short-term loans in VND with a maximum interest rate of 4,0%/year.
- People's Credit Funds and microfinance institutions shall grant short-term loans in VND with a maximum interest rate of 5,0%/year for loan demands to meet borrowers' funding demands in certain business sectors.
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What are the regulations on loan interest rates between banks and customers in Vietnam?
Under Article 13 of Circular 39/2016/TT-NHNN amended by Clause 4, Article 1 of Circular 06/2023/TT-NHNN on loan interest rates:
- A credit institution and its customer shall agree on the interest rate depending on capital demands and supplies on the market, loan demands and creditworthiness of customers, unless otherwise stipulated by the State Bank's regulations on the maximum interest rate outlined in Clause 2 of Article 13 of Circular 39/2016/TT-NHNN.
- If the customer has been rated transparent and healthy in its financial status by the credit institution, the credit institution and the customer shall agree on the interest rate on a short-term loan in VND which shall not exceed the maximum lending interest rate decided by SBV’s Governor over periods of time to meet certain demands for the borrowed fund as follows:
+ Loans taken out to support the agricultural and rural development sector under the Government’s regulations on credit policies for agricultural and rural development;
+ Loans taken out to implement the export business plan in accordance with the Law on Commerce and its instructional documents;
+ Loans taken out to finance business activities of small and medium-sized enterprises under the Law and the Government’s regulations on support for the development of small and medium-sized enterprises;
+ Loans taken out to develop ancillary industries under the Government’s regulations on development of ancillary industries;
+ Loans taken out to finance business operations of enterprises that apply high technologies included in the List of prioritized high technologies approved by the Prime Minister and other high-tech enterprises under the provisions of the Law on High Technology and its instructional documents.
- Terms and conditions of an agreement on the interest rate shall comprise interest rate levels and methods for calculating the interest rate on a loan. Where the interest rate is not converted into %/year and/or the method for calculating the interest rate based on the actual outstanding amount of debt and time length of maintenance thereof is not applied, the loan agreement must include terms and conditions of the interest rate converted into %/year (one year is calculated as three hundred and sixty five of days) according to the actual outstanding amount of debt and time length of maintenance thereof.
- If a customer fails to repay or fully repay the agreed amount of loan principal and/or interest at the payment due date, the customer shall be obliged to repay loan interest as prescribed hereunder:
+ The amount of interest on principal is charged at the agreed interest rate in proportion to the period during which repayment of that principal due has not been made;
+ If a customer fails to make due payment of interest as prescribed by Point a of this Clause, that customer must pay late payment interest charged at the interest rate agreed upon between the credit institution and customer which is not allowed to exceed 10%/year interest rate on the outstanding balance of late payment interest in proportion to the period of late payment;
+ Where a debt has become delinquent, the customer owing a delinquent debt must pay interest on the outstanding amount of principal which is overdue in proportion to the period of late payment for which the interest rate charged is not allowed to exceed 150% of the interest rate charged on due repayment that is determined upon the date of such debt becoming delinquent.
- Where the variable interest rate is applied, a credit institution and customer must enter into an agreement on principles and factors for determination of the variable interest rate, and on the date of adjustment to the loan interest rate. In cases where referring to factors for determination of the variable interest rate results in different loan interest rates, the credit institution shall apply the lowest loan interest rate.
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