New features in monetary policy operating solutions in 2024

New deposit and loan interest rates of commercial banks have decreased by more than 2%/year compared to the end of 2022.

2023 is a very special year for socio-economic activities in general and banking activities in particular. Monetary policy management has contributed to stabilizing the macroeconomy and controlling inflation at about 3.25%. Supporting liquidity for credit institutions, stabilizing the currency and foreign exchange markets and the State Bank (SBV) has purchased foreign currencies to increase state foreign exchange reserves. Stable inflation and increased foreign exchange reserves are factors contributing to Fitch improving Vietnam’s national credit rating, said Standing Deputy Governor of the State Bank Dao Minh Tu, at the Press Conference to deploy the banking sector’s tasks in 2024.

According to Deputy Governor Dao Minh Tu, up to this point, lending interest rates have fallen very low, even in areas that are not priority subjects. Many opinions say that interest rates have decreased to the same level as 20 years ago (source: SBV)

According to Deputy Governor Dao Minh Tu, lending interest rates have fallen significantly, even in areas that are not priority subjects. Many opinions indicate that interest rates have decreased to levels comparable to those from 20 years ago (source: State Bank of Vietnam – SBV).

Mr. Tu also noted that the SBV has continuously adjusted operational interest rates downwards four times, with reductions ranging from 0.5% to 2% per year, amid a global context of rising and high interest rates. These measures have facilitated a reduction in lending rates in the market. As a result, deposit and new lending rates of commercial banks have fallen by more than 2% per year compared to the end of 2022.

“Currently, lending rates have reached very low levels even in non-priority sectors. Many opinions assess that interest rates have decreased to levels that are equivalent to those from 20 years ago. Additionally, the SBV has managed the exchange rate flexibly, aligning it with domestic and international situations, which has helped absorb external shocks, maintain stability in exchange rates, and mitigate significant short-term fluctuations, thus stabilizing the value of the currency; ensuring liquidity, and fully meeting the legitimate demand for foreign currency,” Mr. Tu stated.

In the credit sector, the SBV has implemented a range of solutions, policies, and credit programs in a synchronous and decisive manner, focusing all resources to ensure adequate capital supply for the economy and to support businesses and people in overcoming difficulties and recovering production. This includes efforts to improve the legal framework for lending, simplify procedures, reduce documentation for loans, enhance bank-business connectivity nationwide, and increase specialized and preferential credit programs, creating more favorable conditions for people and businesses to access bank credit. With the systemic directives and synchronized solutions from the SBV, by the end of 2023, credit growth reached approximately 13.5%.

The stability and safety of the system of credit institutions continue to be maintained, ensuring the legitimate rights of depositors. Non-performing loans (NPLs) have been actively managed and monitored, especially in the context of the economy and business operations facing numerous difficulties affecting the repayment abilities of enterprises. The legal framework governing monetary policy and banking operations continues to be refined, ensuring the banking system operates safely while being responsive to practical demands and aligning with international standards and practices.

According to the General Statistics Office, as of December 21, 2023, the total means of payment increased by 10.03% compared to the end of 2022 (with the same period in the previous year rising by 3.85%); the capital mobilization of credit institutions grew by 10.85% (compared to a 5.99% increase at the same time the previous year). The surplus capital situation at commercial banks has persisted due to low credit demand in the economy, leading to a significant reduction in mobilization interest rates at year-end, contrary to trends in previous years when commercial banks typically had to raise mobilization rates and launch promotional programs to attract capital to meet the credit needs of individuals and businesses. Currently, the average lending rate of domestic commercial banks for new and outstanding loans is between 8.3% and 10.5% per year; the average short-term lending rate in Vietnamese dong for priority sectors is about 3.8% per year.

As per the General Statistics Office, the central exchange rate in 2023 remained relatively stable due to the SBV’s adequate management and flexible foreign exchange interventions, minimizing unusual fluctuations in the market exchange rate and contributing to stability while meeting the legitimate demand for foreign currency. As of December 25, 2023, the central exchange rate was set at 23,895 VND/USD, marking a 1.2% increase compared to the end of 2022.

In line with Resolution No. 11/NQ-CP on economic and social recovery and development, by December 25, 2023, the total disbursed capital from social policy credit programs reached over 107.3 trillion VND, supporting more than 2.2 million poor households, near-poor households, and other policy beneficiaries with loans within the year. The total outstanding balance of social policy credit reached 331.3 trillion VND, marking a 16.9% increase compared to 2022, benefiting over 6.8 million poor, near-poor households, and other policy beneficiaries. Notably, the outstanding loans from preferential lending policies under Government Resolution No. 11/NQ-CP reached 38.225 trillion VND, achieving 99.5% of the program plan.