3-31-2020, 13:47 GMT+7

Synchronous measures support businesses

 Along with ministries and agencies in the country, the State Bank of Vietnam (SBV) has developed a number of measures to create favourable conditions for businesses and people who are facing difficulties due to the Covid-19 epidemic.

In addition to measures removing difficulties for production and business under Government policy, the SBV has reduced policy interest rates. The maintenance of reserve requirement ratios and increase of reserve deposit interest rates are considered appropriate in the current environment. According to the KB Securities Vietnam Joint Stock Company (KBSV), the SBV has raised the interest rate of Vietnamese Dong-denominated compulsory deposits from 0.8% to 1.0% per year in order to support banks' profits as the income of commercial banks has been reduced following the implementation of preferential credit packages worth around VND285 trillion for enterprises affected by Covid-19.

The increase in interest rates for compulsory reserve deposits has helped credit institutions with abundant liquidity for deposits at the SBV enjoy interest rates of 1% per year, thereby creating a basis for the reduction of capital costs and lending rates for enterprises. Meanwhile, the maintenance of reserve requirement ratios can help the SBV maintain room to run policies in the near future. In reality, businesses’ demand for capital is still weak and the global economy is witnessing many complicated developments.

The reserve requirements, used together with other tools such as interest rates, exchange rates, open market operations measures (OMO) and credit limits, have helped the SBV operate and achieve its targets in the most effective manner. The goals that the SBV has set out are the assurance of macroeconomic stability, inflation control, support for production and business, and the enhancement of economic growth. With these decisions, regulators also showed their careful consideration in adjusting the benchmark interest rates and ensuring the effectiveness of the policies in line with the macro balance and developments in domestic and international financial markets. The policies, which have been implemented by the SBV, are aimed at ensuring the liquidity of the banking system and supporting credit institutions better to balance capital sources and slash lending interest rates for enterprises.

The adjustment of the policy interest rates is also a clear signal that the SBV is willing to support credit institutions in case they need access to capital. However, up to now, it could be said that the impact of the disease on the economy has increased because it is impossible to determine when the epidemic ends. The activities of many sectors, such as aviation and transportation, have been narrowed. Many enterprises, especially medium and small sized ones, have had to suspend their operations. Therefore, there are still a lot of issues in need of being researched and studied. The relevant agencies are analysing State support, the budget for the economy, and the banking sector’s assistance to businesses and people to realise the goal of helping enterprises overcome these difficulties. This is also a way to solve the difficulties the banking sector is experiencing.

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