Vietnamese Deputy Prime Minister Nguyen Van Thang has ordered the State Bank of Vietnam (SBV) to bring lending rates down by 1.5 to 2 percentage points for businesses and priority sectors, according to Tuoi Tre News.

The order follows a sharp rise in borrowing costs across the country. SBV figures show the average lending rate reached 10.7% in August, 0.2 percentage points higher than in July and roughly three points above its level a year earlier. The increase is squeezing companies and households as Hanoi pursues double-digit economic growth.

At a meeting on monetary policy management, Thang said turbulence in the global economy was weighing on Vietnam's interest rates, exchange rate and inflation. He added that high costs were making credit harder for firms and individuals to obtain. He told the central bank to deliver the cuts while preserving financial stability and holding inflation in check, and he called for closer alignment of monetary and fiscal policy.

The SBV governor will personally oversee the rate reductions and must ensure the banking system has enough liquidity. Thang also demanded stricter monitoring of lenders over bad debts, risky property loans, cross-ownership and misconduct. Banks that disregard the central bank's directives or compete unfairly on rates could be penalised.

Some loans now cost far more than the average. Annual rates on personal loans have reached 17% to 18%, some car loans exceed 19%, and business loans run at 13% to 14%. Deposit rates have also climbed. Cake by VPBank and Vikki Bank pay up to 9.6%, some smaller banks offer 9.8%, and the four largest state-owned lenders now pay more than 8% on terms longer than six months.

"Business conditions are highly uncertain. With lending rates above 12-13 percent a year, companies could easily struggle to earn enough to cover their interest payments," Tran Quoc Trong, director of Thanh Long Wine Production Co. Ltd. in Tay Ninh Province said. 

Tran Van Dong, who operates a food business in Saigon Ward, Ho Chi Minh City, has paid down his debts and scaled back operations. "We recently repaid a loan carrying an interest rate of 9-10 percent a year, but the bank now quotes 13-14 percent for a new loan," he said.

Several large lenders have already acted. BIDV launched a preferential programme on October 15 offering short-term dong loans from 6% a year, up to two points below its standard rates. Vietcombank chairman Nguyen Thanh Tung said the bank had committed to lowering lending rates by at least two percentage points a year through the end of 2026.