Low demand for capital due to COVID-19 has caused bank credit in the first half of April to drop 0.5 per cent compared with the end of March, according to the State Bank of Viet Nam (SBV).

However, with a rise of 1.3 per cent in the first quarter of this year, credit had still increased by 0.8 per cent by April 15.

The SBV said credit demand from firms involved in industry, construction and agriculture had increased by 1 per cent and 0.3 per cent, respectively, while the figures had declined for trade, services, tourism and consumption. Credit demand from small- and medium-sized enterprises (SMEs) also decreased by more than 1 per cent.

According to Nguyen Quoc Hung, director of the SBV’s Credit Department, demand had dropped off sharply and not only in Viet Nam because many other countries were applying social distancing measures to stem the outbreak, which had caused a sharp decline in both local consumption and export demand.

Given the current difficulties, many domestic firms were focusing on capital recovery and debt repayments and had no need for new loans, Hung said, adding four State-owned commercial banks wanted to boost their credit portfolios but could not.

According to the SBV, commercial banks were mainly focusing on debt structuring and providing VND300 trillion (US$12.9 billion) worth of credit at low interest rates to firms affected by the pandemic. More than ten banks had committed to lending at interest rates reduced by 0.5-2.5 percentage points. As of April 10, almost VND126 trillion ($5.4 billion), or 42 per cent of the amount, had been lent to 6,500 borrowers.

Military Bank (MB) has launched two credit packages worth VND45 trillion for large firms. The first package worth VND17 trillion with interest rates cut by 0.5-1 percentage points applied until September 30 this year is for customers with outstanding loans hit by COVID-19. The second package valued at VND28 trillion with interest rates of 4.8-6 per cent per year is set aside for new loans to stimulate firms.

MB has already introduced a VND30 trillion package and another VND20 trillion package with preferential interest rates for individual customers and SMEs.

Nam A Commercial Joint Stock Bank (NamABank) has also launched a credit package worth VND15 trillion with an interest rate reduction of 2 per cent for individual and corporate customers in agriculture, accommodation, restaurants and import-export.

Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) has also announced a VND10 trillion credit package with an interest rate cut of 2 percentage points for all borrowers until September 30 this year. VNS