Vietnam orders push to slash lending rates amid surging borrowing costs

Speaking at a meeting on monetary policy management on Thursday, the deputy prime minister called on the State Bank of Vietnam (SBV) to swiftly lower borrowing costs to support businesses and households and boost economic growth.

He said global economic uncertainties were putting pressure on Vietnam's interest rates, exchange rates, and inflation, while elevated borrowing costs were making it increasingly difficult for businesses and individuals to access credit.

Thang instructed the central bank to prioritize lending rate cuts of 1.5-2 percentage points for production, business activities, and government-prioritized sectors while maintaining financial stability and keeping inflation under control.

He also called for closer coordination between monetary and fiscal policies to support Vietnam's goal of achieving double-digit economic growth.

The SBV governor was tasked with directly overseeing the implementation of interest rate reductions and ensuring sufficient liquidity in the banking system.

The deputy prime minister also demanded tighter supervision of credit institutions, particularly regarding bad debts, risky real estate lending, cross-ownership, and banking misconduct.

Banks were instructed to reduce operating costs, accelerate digital transformation, and publicly disclose lending rates while complying with regulatory requirements.

Credit institutions that fail to follow central bank directives on interest rate reductions or engage in unfair interest rate competition could face penalties.

Borrowing costs remain a burden for businesses

The government's push comes as lending and deposit rates have surged across Vietnam, placing growing financial pressure on businesses and households.

According to SBV data, the average lending rate reached 10.7 percent in August, up 0.2 percentage points from July and around three percentage points from a year earlier.

Borrowing costs have climbed much higher for certain loans, with annual rates reaching 17-18 percent for personal loans, over 19 percent for some car loans, and 13-14 percent for business loans.

Meanwhile, deposit rates at some banks have approached 10 percent.

Cake by VPBank and Vikki Bank have offered deposit rates of up to 9.6 percent annually, while rates at some smaller banks have reached 9.8 percent.

Even Vietnam's four largest state-owned commercial banks have raised deposit rates for terms exceeding six months to more than eight percent.

For businesses, the impact of rising borrowing costs is already being felt.

Tran Quoc Trong, director of Thanh Long Wine Production Co. Ltd. in Tay Ninh Province, said small- and medium-sized enterprises continued to struggle to access preferential credit despite government support programs.

"Business conditions are highly uncertain. With lending rates above 12-13 percent a year, companies could easily struggle to earn enough to cover their interest payments," he told Tuoi Tre (Youth) online newspaper.

Tran Van Dong, who runs a food business in Saigon Ward, Ho Chi Minh City, said he had opted to pay down his loans and scale back operations to minimize risks amid rising borrowing costs.

"We recently repaid a loan carrying an interest rate of 9-10 percent a year, but the bank now quotes 13-14 percent for a new loan," he said.

Nguyen Dang Hoang Son, a representative of the Thu Duc Ward Business Association, said that secured business loans currently carried annual interest rates of at least 11-12 percent, while unsecured loans cost more than 16-17 percent and required a strong credit history.

BIDV, Vietcombank move to lower lending rates

Some major Vietnamese banks have already announced measures to ease borrowing costs.

The Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) launched a preferential lending program on October 15, offering short-term loans in Vietnamese dong at rates starting from six percent annually, up to two percentage points below its standard rates.

The program targets production and business activities in government-prioritized sectors, subject to the bank's lending requirements.

BIDV said the initiative was designed to improve access to affordable financing and support businesses during the peak year-end period.

Meanwhile, Vietcombank chairman Nguyen Thanh Tung said that the bank had been committed to cutting lending rates by at least two percentage points per year through the end of 2026 to help businesses access capital more easily.

The announcements come as the government steps up pressure on the banking sector to ease financing costs without compromising financial stability or credit quality.