Banks ordered to cut deposit and lending rates immediately

The State Bank of Vietnam (SBV) has issued Official Document No. 9608, dated October 18, 2026, outlining measures that credit institutions must implement to ensure banking system safety and stabilize the monetary market.

Under the directive, the central bank has instructed credit institutions to carry out a series of urgent measures.

Banks must immediately reduce their publicly listed deposit interest rates by at least 0.5 percentage points per year for deposits with terms of six months or longer.

They are strictly prohibited from engaging in deposit rate wars or unfair competition that could undermine financial and monetary security.

At the same time, banks must lower lending rates for customers, with particular emphasis on reductions of 1.5-2 percentage points per year for loans supporting production, business activities and priority sectors.

The SBV has also directed credit institutions to channel more financing into production and business activities, priority sectors and key drivers of economic growth.

Credit should also support major infrastructure projects and strategic industries identified for development under directives issued by the Government and the Prime Minister.

For large-scale projects, banks are encouraged to strengthen syndicated lending arrangements to mobilize sufficient financing.

However, the central bank emphasized that credit institutions must not relax lending standards or sacrifice credit quality in pursuit of higher loan growth.

Non-compliant banks could face tighter credit growth limits

The SBV has instructed credit institutions to strengthen oversight of lending to potentially high-risk sectors and customers or customer groups with large outstanding loan balances.

Particular attention must be paid to borrowers and related groups with interconnected financial interests, including those involving ownership stakes exceeding 5% of a customer's charter capital, shared collateral, common collateral owners, financing concentrated in the same project or shared repayment sources.

Banks must also strictly control loans provided to organizations and individuals for the purpose of making capital contributions or acquiring transferred equity interests.

In addition, credit institutions are required to review their internal regulations governing loan classification and loan-loss provisioning.

The central bank stressed that banks must not conceal non-performing loans or delay recognizing credit risks. Loan-loss provisions must be established fully and promptly in accordance with applicable regulations.

The SBV also warned of consequences for institutions that fail to comply with directives from the Government, the Prime Minister or the central bank regarding interest rates.

Banks found engaging in unfair competition that destabilizes the market may have their remaining credit growth quotas for 2026 reassessed and face lower credit growth limits in 2027.

The central bank may also require these institutions to comply with one or more prudential safety ratios set above the standard regulatory requirements.

These measures are intended to reinforce financial discipline, discourage destabilizing interest rate competition and ensure that credit expansion does not compromise the stability of Vietnam's banking system.

Tuan Nguyen