The State Bank of Vietnam (SBV), the country’ s central bank, has delayed the roadmap for reducing the ratio of short-term capital for medium- and long-term loans at banks for one more year.

The move is necessary to ensure efficiency of existing preferential rates policy for customers amid the Covid-19 pandemic.

Under the newly issued circular No.08/2020/TT-NHNN on August 14, scheduled to take effect from October 1, 2020, banks and foreign banks and branches will be allowed to maintain the maximum ratio of short-term capital used for medium and long-term loans at 40% until September 30, 2021.

The ratio would later be reduced to 37% from October 1, 2021 to September 30, 2022; to 34% from October 1, 2022 to September 30, 2023; and to 30% from October 1, 2023.

The SBV suggested the move is necessary to ensure efficiency of existing preferential rates policy for customers amid the Covid-19 pandemic.

With the pandemic’s impacts on production and business activities, customers’ deposits at banks are expected to decrease, stated Bao Viet Securities Company (BVSC).

Therefore, in order to keep implementing preferential interest rate policies and maintain a stable medium- and long-term debt for customers, the SBV’s decision would help banks apply the maximum rate of short-term capital for medium- and long-term loans, stated the securities firm.

“It is necessary to delay the roadmap of tightening the ratio of short-term capital sources used for medium and long-term lending, in order to help credit institutions better support customers to restart production and business after the pandemic,” BVSC asserted.

Data from the SBV revealed as of the end of the first quarter, the ratio of short-term capital used for medium- and long-term loans at state-owned commercial banks was 28.9%, while the similar rate at private banks was 28.7%. These rates are significantly lower than the ceiling of 40% set up by the SBV.