Interest rates will be reduced by at least 1%

The State Bank of Vietnam (SBV) said that, implementing Decision No. 1490/QD-TTg of the Prime Minister approving the Project "Sustainable development of one million hectares of high-quality and low-emission rice cultivation associated with green growth in the Mekong Delta by 2030" (Decision 1490) and the direction of Deputy Prime Minister Ho Duc Phoc in Document No. 7142/VPCP-KTTH on the implementation of the Program for lending to link production, processing and consumption of rice products, the SBV has coordinated with relevant ministries, branches and localities to develop a Program for lending to link production, processing and consumption of high-quality and low-emission rice products in the Mekong Delta (MD).

Accordingly, on October 11, 2024, the State Bank of Vietnam issued Document No. 8363/NHNN-TD to the People's Committees of provinces and cities in the Mekong Delta region; Document No. 8364/NHNN-TD to credit institutions (CIs), foreign bank branches, and State Bank branches in provinces and cities in the Mekong Delta region to guide a number of contents for credit institutions, foreign bank branches, and State Bank branches in provinces and cities to organize and implement.

The representative of the State Bank said that the lending program will be implemented in 2 phases, based on the 2 implementation phases of the Project according to Decision 1490, in which the pilot phase will be implemented from now until the end of 2025 with Agribank being the main lending bank and the expansion phase will start from 2026 to 2030 at many other credit institutions.

Regarding resources and lending principles, according to the representative of the State Bank, capital sources of credit institutions will meet short, medium and long-term capital needs of all stages, from production, purchasing, processing and consumption in the rice linkage.

Credit institutions make loans using their own capital; therefore, lending is carried out under a commercial mechanism with lending conditions according to current regulations of credit institutions for customers.

However, there will be priority in interest rates. Specifically, credit institutions will proactively balance capital sources and reduce costs to consider applying a loan interest rate that is at least 1%/year lower than the loan interest rate of the corresponding term currently applied to customers of the same term/same group.

Enjoy “double” benefits

Notably, according to the State Bank, in addition to the incentive of a minimum interest rate reduction of 1%, entities participating in rice linkages also enjoy many other incentives according to the provisions of Decree 55/2015/ND-CP, Decree 116/2018/ND-CP of the Government on credit policies for agricultural and rural development, such as being able to borrow up to 3 billion VND in the case of no collateral, the minimum is 100 million. This loan amount will be decided by credit institutions, depending on each individual customer, cooperative group, and cooperative.

At the same time, they will enjoy loan policies to encourage agricultural production according to the linkage model, high-tech agriculture with unsecured loans up to 70%-80% of the value of the plan or project; At the same time, regulations on cash flow management in agricultural linkage loans aim to limit risks and encourage credit institutions to promote lending.

Projects under this scheme also enjoy special debt settlement mechanisms such as restructuring debt repayment terms and maintaining debt groups for customers facing difficulties due to objective and force majeure reasons; debt cancellation mechanism for customers facing risks due to natural disasters, large-scale epidemics or customers who are key affiliated organizations, high-tech enterprises facing risks due to objective and force majeure reasons.

In addition, there is a policy to encourage people to buy agricultural insurance by reducing loan interest rates by at least 0.2% per year compared to interest rates of loans of the same type and with corresponding terms.

The representative of the State Bank affirmed that the State Bank and the banking sector have issued full mechanisms, policies and have documents guiding the implementation of lending under the Program to facilitate the entities participating in the association in borrowing from credit institutions. However, the ability to disburse this capital flow depends on many issues.

In particular, the State Bank stated that currently, the Ministry of Agriculture and Rural Development, the People's Committees of provinces and cities have not yet announced the actual cost norms for rice production in rice linkages and have not yet determined and announced specialized areas, linkages and entities participating in the linkages according to Decision 1490. This makes it impossible for credit institutions to assess the capital needs for linkage chains according to the Project. However, in principle, the disbursement capacity depends on the actual capital absorption capacity of the entities participating in the linkages.

The State Bank affirmed that in the coming time, closely following the direction of the Government and the Prime Minister, and with the coordination of ministries, branches and localities, the State Bank and the banking sector are committed to continuing to accompany and actively coordinate with relevant agencies to promote the implementation of the Loan Program in particular and the implementation of the Project under Decision 1490 in general.