Huge state treasury yield makes banks difficult to reduce interest rates

Governor of the State Bank (SBV) Nguyen Thi Hong

In her report to the National Assembly on the implementation of a number of resolutions of the 14th National Assembly on the banking sector, Governor of the State Bank (SBV) Nguyen Thi Hong said that the SBV regularly coordinates closely with ministries and sectors in operating monetary policy, performing to control prices of some goods and services to keep inflation and macroeconomy stable.

However, in recent years, state agencies have been disbursing still slowly compared to requirements, leading to a surplus of state funds. Subsequently, state budget revenues from tax collection and bond issuance are currently at a high level. Specifically, it accounts for 6.94 percent of the total means of payment while it was 6.42 percent and 4.97 percent at the end of 2022 and at the end of 2021 respectively.

This situation leads to a reduction in the amount of money in the economy, making it difficult for businesses to mobilize capital to invest in production and business activities as well as credit institutions.

Moreover, according to the report, when there is an increase in capital investment for production and business activities and economic recovery, capital stagnant in the state budget will make it difficult to reduce interest rates of the banking system.

Governor Nguyen Thi Hong explained for extending the time in submitting the Decree on a controlled testing mechanism for financial technology (Fintech) activities in the banking sector as per the Resolution No. 62/2022/QH15 dated June 16, 2022 on questioning activities at the third session at the 15th National Assembly.

Ms. Nguyen Thi Hong said that the State Bank has coordinated with relevant ministries and agencies to develop a draft decree, and then sought opinions from organizations and individuals to send it to the Ministry of Justice for appraisal. Based on the appraisal opinions of the Ministry of Justice, the State Bank of Vietnam has completed the draft decree and submitted the draft decree dossier to the Government in 2022. The draft decree dossier has been sent for comments to government agencies.