Commercial banks boosted the use of short-term capital for medium- and long-term lending after the State Bank of Vietnam (SBV) doubled the allowed capital beginning February 1, 2015.

Under Circular 36/2014/TT-NHNN, prescribing limits and safety ratios in operations of credit institutions and branches of foreign banks, commercial banks were allowed to raise the rate of short-term capital used for medium- and long-term loans from 30 to 60 percent.

According to data from the central bank, the rate of short-term capital used for medium- and long-term loans increased sharply at commercial banks after the circular took effect, hitting a record 29.66 percent by February 28, 2015. For many years, the rate was often only 20-24 percent.

The change is expected to help firms have better access to medium- and long-term credit, as well as further boost credit growth.

In fact, this year, enterprises have had growing needs for medium- and long-term loans to expand production, improve technology, as well as to prepare for bilateral and multilateral economic partnership agreements, such as the ASEAN Economic Community (AEC) and Trans-Pacific Partnership (TPP), which Vietnam signed.

SBV Governor Nguyen Van Binh also affirmed that the SBV would find ways to further lower lending rates to support enterprises, especially those for medium- and long-term loans. Specifically, if macro conditions become more attractive, the SBV would seek to decrease the medium- and long-term lending rates by 1 percent to 1.5 percent to further assist enterprises in their long run development.

According to the SBV's report for the week ending April 17, 2015, State-owned commercial banks continued to apply medium- and long-term rates of 9-10 percent per year to 5 priority sectors, including agricultural producers, exporters, small- and medium-sized enterprises (SMEs), supporting industries and hi-tech businesses. Other sectors were charged the lending rate of 9.3-11 percent.

Commercial banks also offered US dollar lending interest rates at 3-5.5 percent per year for short-term loans and 5.5-6.7 percent per year for medium- and long-term loans.-VNA