Nguyen Van Binh, governor of the State Bank of Vietnam (SBV), has asked local credit institutions to reduce the lending rates by 1- 1.5 percent per year to support local business community, according to deputy head of SBV at a recent press conference in Hanoi.

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Commercial banks must be active in the restructuring of their debts to reduce interest rates to assist local businesses to access capitals following the request of the head of SBV, said Nguyen Thi Hong, Deputy Governor of the Vietnam’s central bank, at the conference held in Hanoi on Friday.

The event was organized to announce two directives of the SBV’s head in managing the country’s monetary policy and boosting the tackling of bad debts in 2015.

Regarding monetary policy, according to Hong, the governor required credit institutions to ensure liquidity to maintain stable interest rates and strive to further reduce interest rates for medium and long-term lending by 1-1.5 percent per year.

All credit institutions must try to balance their capitals to help remove difficulties for trading and producing this year, Hong asserted.

All credit institutions must try to balance their capitals to help remove difficulties for trading and producing this year, Hong asserted.

In 2015, the banking industry sets the targets of 16-18 percent rise for total means of payment, 13-15 percent increase of credit to adapt to changes in the actual situation, she said. As for foreign exchange rates, the adjustment does not exceed 2 percent.

Credit will be prioritized for the fields of agriculture and rural development, exporting, supporting industries, and for small and medium enterprises and businesses with high-tech applications.

"To assist businesses to access capitals, commercial banks should continue to be active in the restructuring of their debts," Hong said.

All hands on deck for bad debt tackling

Regarding bad debts, the head of SBV also banned banks from hiding bad debts, Hong added.

In the directive on boosting the tackling of the bad debts, the Governor also requires banking industry to strive to bring the bad debt ratio to below 3 percent by end the year.

To achieve this goal, the central bank set out a series of measures such as a plan allowing the purchase of bad debts according to the market mechanism. The plan has been submitted to the Prime Minister for approval.

At the same time, SBV also strengthens the management, inspection and supervision of credit institutions and ensure the absolute safety of the system.

For credit institutions, the Governor prohibits use of measures to conceal bad debts, reflecting false credit quality and business results.

It is strictly forbidden to take advantage of bad debts in order to gain profits, she added.

In addition, the commercial banks have to strictly abide by the provisions of the law on safe banking, debt restructuring, loan classification and loan-loss provisioning, Hong said.

On the other hand, the credit institution must develop and report to the SBV their bad debt tackling plans in 2015 with detailed amount of bad debts handled each month and measures on the use of loan-loss provisioning and bad debt sale to the Vietnam Asset Management Co (VAMC).

The roadmap for bad debts handing is to ensure local banks can handle a minimum of 60 percent of the bad debts by the end of June this year, Hong said.

VAMC should strengthen collaboration with credit institutions in debt recovery, debt restructuring, the sale and settlement of bad debts and collaterals. Besides, VAMC will create favorable conditions for investors in the country and abroad to participate in buying bad debts and collaterals, she said.