Vietnam Central Bank Moves to Ease Lending Rules to Spur GDP Growth

HANOI – The State Bank of Vietnam (SBV) has proposed raising the maximum ratio of short-term capital used for medium- and long-term lending by credit institutions, seeking to revert the limit to 40% from the current 30%. If approved, the new regulation is designed to give credit institutions more capacity to provide capital to businesses and investment projects, a move aimed at promoting high economic growth in the coming years while increasing flexibility in the central bank’s monetary policy management. The proposal is part of a draft circular amending and supplementing several articles of Circular 22/2019/TT-NHNN, which governs limits and safety ratios for banks, and is currently open for public comment.

The proposed adjustment would reverse a key prudential measure that took effect on October 1, 2023. On that date, the ratio was reduced from 40% to 30% as part of a pre-defined roadmap in Circular 22 intended to control maturity risk and ensure liquidity safety for the banking system. However, citing increasing demand for medium- and long-term capital across the economy, the SBV said that adjusting the ratio back to 40% would help credit institutions be more proactive in deploying short-term funds to support credit growth. The central bank stated that the amendments are based on policies and resolutions from the Party and the Government focused on achieving high economic growth during the 2026-2030 period. If enacted, the new regulations are expected to significantly expand the banking system's capital supply capacity.

In addition to relaxing the short-term capital use ratio, the draft circular also amends the regulation on how to determine total deposits when calculating the crucial loan-to-deposit ratio. The change specifically concerns how deposits from the State Treasury are treated. Under current regulations, when determining total deposits, credit institutions must exclude all demand deposits of the State Treasury and a fixed 80% of the Treasury's time deposits. The new draft proposes retaining the exclusion of demand deposits but introduces a more flexible mechanism for time deposits. While the 80% exclusion rate would remain as a baseline, the SBV’s governor would be empowered to decide on a different rate depending on market developments in each period.

According to the SBV, this amendment aims to create an additional tool for managing monetary policy, helping the central bank be more proactive in balancing liquidity and supporting credit growth when necessary. Both proposed amendments are intended to increase the operating space for credit institutions while still ensuring the safety of the financial system. Increasing the ratio of short-term capital used for medium- and long-term lending will help banks retain more resources to meet the investment capital needs of businesses, especially as many manufacturing, infrastructure, and real estate sectors require substantial long-term capital. Meanwhile, adjusting the method of calculating total deposits will give the regulatory authority more flexibility in managing safety ratios in line with money market developments and economic growth goals.

The draft also stipulates that after the new circular takes effect, some related provisions in Circular 08/2020/TT-NHNN and Circular 08/2026/TT-NHNN will be repealed to ensure the consistency of the legal system. If enacted, these amendments are expected to create more room for credit in the banking system, improve businesses' access to medium- and long-term capital, and enhance the SBV's role in managing monetary and credit policies to support the nation's economic growth targets.