Is the Government continuing to reduce lending interest rates in the last months of 2023 in Vietnam?

Is the Government continuing to reduce lending interest rates in the last months of 2023 in Vietnam?

On July 31, 2023, the Government Office has just issued Notice 297/TB-VPCP 2023 on the Prime Minister's conclusions at the Conference summarizing banking operations in the first 6 months of the year and implementing tasks in the last 6 months of 2023.

According to Section 3 of Notice 297/TB-VPCP 2023, the Government requires the State Bank to continue completing assigned tasks and implement them in the last 6 months of 2023 as follows:

3. In the near future, the State Bank of Vietnam needs to be further active, decisive, extensive, and exhaustive and promptly, effectively implements direction of the Government, the Prime Minister in order to further successfully implement tasks, especially primary tasks below:

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b) Continuing to implement monetary policies actively, flexibly (reducing loan interest, increasing credit limit appropriate to market development, supplying M2 cash in a timely and effective manner, channeling credit in growth drives: investment, consumption, export, etc.), promptly, effectively, and cooperate closely, harmoniously with expansionary fiscal policies on a reasonable, goal-based, rapid, and thorough manner; reasonably and effectively balancing interest and rates, inflation and growth to stabilize macroeconomics, control inflation, maintain major balances of the economy; prioritize resolving difficulties in manufacturing and business operations.

Thus, the Government has issued a request for the State Bank to continue reducing loan interest, increasing credit limit appropriate to market development, supplying M2 cash in a timely and effective manner, channeling credit in growth drives: investment, consumption, export, etc.;

In addition, the Government also requires a number of other key tasks such as:.

- Continue solutions to promote disbursement of a credit package of 40 trillion VND for interest rate support, 120 trillion VND for social housing loans and 15 trillion VND for the furniture and seafood manufacturing industry.

- Continue to stabilize the foreign exchange market, stabilize the value of Vietnamese Dong...

What content does the agreement on the interest rate include in Vietnam?

In Clause 2, Article 13, Circular 39/2016/TT-NHNN stipulates loan interest rates as follows:

Interest rates

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3. 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.

4. 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:

a) 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;

b) 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;

c) 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.

5. 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.

Thus, the content of the loan interest rate agreement in Vietnam includes:

- Loan interest rate;

- Method of calculating interest on loans.

If the loan interest rate is not converted at a rate of %/year and/or the interest calculation method based on the actual loan balance and the time to maintain that actual principal balance is not applied, then in the agreement on the interest rate must contain content about:

The interest rate is converted at %/year (one year is three hundred and sixty-five days) calculated based on the actual loan balance and the time the actual loan balance is maintained.

What are maximum interest rates of short-term loans in Vietnamese Dong applicable from June 19, 2023 in Vietnam?

In Article 1, Decision 1125/QD-NHNN 2023 stipulates maximum interest rates of short-term loans in Vietnamese Dong as follows:

Maximum interest rates of short-term loans in Vietnamese Dong (VND) according to Clause 2 Article 13 of the Circular No. 39/2016/TT-NHNN dated December 30, 2016 are as follows:

1. Credit institutions and foreign bank branches (except for People's Credit Funds and microfinance institutions) shall grant short-term loans in VND with the maximum interest rate of 4,0%/year.

2. People's Credit Funds and microfinance institutions shall grant short-term loans in VND with the maximum interest rate of 5,0%/year.

Thus, from June 19, 2023, the maximum interest rate of short-term loans in Vietnamese Dong is 4.0%/year for credit institutions and foreign bank branches and 5.0%/year for People's Credit Funds and microfinance institutions.

Best regards!