Hanoi (VNA)🐻 - Vietcombank will be the first bank to cut its lending interest rate in response to the Government’s recent resolution.

Vietcombank chairman Nghiem Xuan Thanh announced on October 14 that his bank would cut lending rate for five prioritised sectors of agriculture, exports, supply-parts industries, small- and medium-sized enterprises and hi-tech businesses, besides start-up firms. Accordingly, lending interest rates for short-term loans in those sectors will be reduced to 6 percent per year from today, down 1 percent. All existing outstanding loans with interest rate of more than 6 percent will be also adjusted down to 6 percent at the maximum. In addition, a further rate cut even to 5 percent could be applied for firms which have effective business and production performance and use other Vietcombank products. Thanh said this cut would last to the end of the year. In 2017, Vietcombank will base its rates on the macro economy and the State Bank of Vietnam’s credit policies. It is estimated that the cut could reduce Vietcombank’s profit by roughly 100 billion VND (4.46 million USD). However, Thanh said, his bank would try to cut other costs to offset the reduction, ensuring the bank’s profit plans this year. Vietcombank’s lending market share currently accounts for more than 9 percent of the entire banking system. Thanh expected that the pioneer move of Vietcombank would create momentum for other banks to cut lending rate to support firms. "Liquidity at other banks is strong, and a lending reduction is feasible," Thanh said, adding that "banks cannot be healthy unless firms are healthy". Thanh was not also concerned that the lending cut in major banks could cause deposit movement toward smaller banks that offer higher deposit rate to lure depositors. According to Thanh, four State-owned banks currently account for 50 percent of the country’s total capital mobilisation. Besides, the central bank also sets lending room for each bank, so that small banks have no demand for capital attraction when they meet the lending room. Vietcombank’s profit in the first nine months of this year is estimated at 6.2 trillion VND. The bank’s total capital mobilisation in the period rose 12 percent against early this year, while lending surged 14 percent. Thanh believes that his bank can meet the 18 percent credit growth allocated by the central bank this year.-VNA