Credit institutions have received some VND200 trillion (US$8.9 billion) yearly from interest rates of bank loans, according to the Ministry of Finance’s estimates.

According to the ministry, the amount is higher than the country’s total corporate income tax of some VND188 trillion yearly, noting that a 0.5-1 per cent reduction in lending interest rate would result in a more positive impact on firms’ business and production than a reduction in corporate income tax.

Finance minister Dinh Tien Dung said it meant most input costs of domestic firms were paid for lending interest rates as they had to mainly base them on bank loans.

Due to the restricted development of the local capital market, the banking system is currently still the most important channel to provide capital for the economy. The banking system’s loans are equal to some 110-120 per cent of the country’s GDP, or VND6 quadrillion.

Currently, the popular lending interest rates are 6-9 per cent per year for short term and 9-11 per cent per year for medium and long term. For customers with transparent financial situation, short-term lending rates ranged from 4 to 5 per cent per year.

The General Statistics Office reported that credit growth in the first half of this year reached 7.54 per cent, the highest level in the last six years. The record high, far above the previous record of 6.28 per cent set in 2015, reflected the market’s significant improved capacity to absorb capital, the office said.

The loans in the period were mainly focused on prioritised and large projects as instructed by the Government, accounting for some 50 per cent of the total outstanding loans. Agriculture and rural industries and small- and medium-sized firms received some 19 per cent and 22 per cent of the total outstanding loans, respectively.

Viet Nam has targeted credit growth of 18 per cent this year, however, some deputies suggested increasing the target to support economic growth at the National Assembly’s meeting recently. — VNS