Vietnam Will Order Banks to Cut or Delay Interest Payments for Virus-Hit Companies
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The State Bank of Vietnam will order commercial banks to eliminate, cut or delay interest payments on loans to companies struggling with plunging revenue because of the coronavirus outbreak.
“We are going to request banks to either exempt, reduce or delay interest payments for loans as of January 23, when the government declared the epidemic,” Nguyen Quoc Hung, head of the central bank’s credit department, said in an interview in Hanoi. The order follows Prime Minister Nguyen Xuan Phuc’s directive to ministries to help businesses cope with the economic fallout from the coronavirus outbreak, he said.
The central bank’s order, which will be announced “soon,” will ease interest payments on about 11% of the banking system’s outstanding loans, valued at 925 trillion dong ($40 billion), Hung said.
The move comes as the nation’s fast-growing economy is at risk of slowing to below 6% for the first time in six years as the virus weakens sectors from tourism to manufacturing. The country’s gross domestic product, which expanded 7.02% in 2019, may grow 5.96% this year if the disruption of the virus continues into the second quarter, the government said earlier this month.
The central bank is not planning any cuts in its policy interest rates now because demand for new loans is low and banks have a surplus of liquidity, Hung said.
“Many businesses are struggling to survive this difficult period,” he said. “So there is no need to loosen monetary policies now. But maybe later.”
The central bank will reevaluate the economy later this year, Hung said. “After the epidemic, we will closely look at each sector and thoroughly assess losses in companies to take suitable steps. That is when loosening monetary policies may be required.”
The central bank in November cut its interest-rate cap for dong deposits and ordered lenders to lower interest rates to support key business sectors.
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