Hanoi (VNA) - On the morning of November 12, Governor of the State Bank of Vietnam Nguyen Thi Hong answered many questions raised by the National Assembly deputies related to the field of the industry.

According to the governor, the Covid-19 pandemic has seriously affected the production and business as well as people. In that context, the State Bank has drastically implemented the Government’s directives and decisions and is among the most responsible ministries and sectors to follow the government’s direction.

For the domestic market, the Governor said that at the beginning of 2022, the State Bank of Vietnam adjusted interest rates with three reductions at 1.5-2 percent, a deep reduction compared to other countries in the region.

According to Governor Hong, in addition to regulating interest rates of the Central Bank, the State Bank has also directed and called on credit institutions to reduce interest rates for both old and new loans. The lending interest rate decreased by 1.66 percent compared to that of the time before the epidemic. The total reduction in interest rates of credit institutions reached 30,000 billion VND. The interest rate reduction will continue to be reduced from now until the end of the year.

In addition, banks are also reducing fees by about VND 2,000 billion for customers. Reducing interest rates helps reduce input costs for businesses and people.

Regarding the room to continue lowering interest rates in the near future, the governor said that monetary policy has two tasks. Firstly, the Central Bank’s monetary policy management is aimed at controlling inflation and stabilising the macro-economy, supporting economic growth but it is not subjective with inflation. Secondly, as the lifeblood of the economy, the banking industry must ensure that the credit system operates safely and is ready to make payments anytime.

“To say if there is room for further interest rate cuts, please be noted that recently, when assessing the current situation of banking activities and the macro-economy, we saw that in 2021, the inflation target of below 4 percent according to the target set by the National Assembly is possible. By the end of October, inflation will increase by 1.81 percent. However, by 2022, inflation risks are under great pressure,” said Governor Nguyen Thi Hong.

The Governor explained that, firstly, the world economy is gradually recovering when countries were vaccinated. Commodity prices on the world market increased sharply, such as gasoline prices, which increased by 55.2 percent in September 2021 over the previous year.

Developed countries have historically high inflation rates such as the US whose inflation reached 5.3 percent in September. With the large openness of the economy, import-export turnover/GDP is 200 percent, Vietnam also has to be under the pressure of import inflation.

In addition, central banks around the world are also changing monetary policy, with 65 interest rate hikes worldwide. Therefore, inflation pressure and monetary policy management pressure are very large.

The Governor of the State Bank also said that the bad debt of the system of credit institutions is increasing. Recently, banks have reduced interest rates with their own financial resources, not money from the budget. When bad debts increase, credit institutions themselves have to use their financial resources to deal with.

“If we let the financial health of credit institutions decline, it will affect the affordability and safety of the whole system. This is a great lesson learned from the previous time when credit growth was high, implementing interest rate support packages in 2008 caused the inflation in 2011 to jump up at 18% at a time,” the governor emphasised.

According to the governor, in the coming time, the SBV will continue to direct the entire banking system to reduce operating costs to further reduce interest rates, but still have to ensure the safety ratio of each credit institution.

The SBV will also actively coordinate with ministries and sectors such as the Ministry of Finance, the Ministry of Planning and Investment to calculate interest rate support packages with a reasonable size, scope and dosage on the basis of ensuring macroeconomic stability and hedge against inflation risks in the coming time as well as hedging risks to the operational safety of the banking system./.