Vietnam central bank says cutting lending rates not optional

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The State Bank of Vietnam will make sure that commercial lenders take its order seriously and cut lending rates on existing loans to below 15 percent, deputy governor Le Minh Hung said.

On July 7, the central bank asked commercial banks to reduce interest rates on outstanding loans and help struggling businesses. It said lenders must cut rates on existing loans to companies to below 15 percent.

Hung told Thanh Nien that many large banks have already lowered rates since mid-July but some others have not implemented the policy yet.

The central bank will deal with those who do not comply with its request, Hung said, asserting that "tough measures" would be taken "if necessary." Lenders will also be required to report their total loans at rates above 15 percent, he added.

Many businesses have complained that many banks have refused to cut rates. Some have offered a reduction in borrowing costs for only well-performing companies.

Hung said even though banks need to make decisions based on their own financial conditions, only supporting healthy companies "is not right"

Banks have to realize that this is the perfect time to lower rates on existing loans, he said, noting that keeping rates too high for companies that are already struggling to repay loans "will not help either of the two sides."

Vo Tri Thanh, deputy head of the Central Institute for Economic Management, a government think-tank, said there will be some sacrifice involved, but banks have to accept the fact that they need to bring interest rates down for long-term benefits.

On Friday, news website VnExpress cited State Bank Governor Nguyen Van Binh as saying that while banks will have to try their best to rescue businesses, they will not do so at all costs.

"Companies that, if rescued, would not have a chance of growing in the future, should be eliminated," he said.

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