The Vietnam Banking Association (VNBA) has proposed that VAT rates imposed on commercial banks be reduced by 2 per cent, as is the case with other businesses, to help them further reduce lending interest rates to support enterprises and streamline credit flows.

Under a decree issued recently by the government on cutting VAT rates by 2 per cent on goods and services subject to a 10 per cent rate, the policy does not apply to certain types of goods and services, including banking activities.

VNBA General Secretary Nguyen Quoc Hung said businesses still face many difficulties despite measures being taken by the government, and the banking sector has similarly encountered many challenges. Capital absorption in the economy is low, even though interest rates have cooled down. Difficulties in the capital and real estate markets have also led to rising bad debts at banks, he said.

Figures from the State Bank of Vietnam show that commercial banks have cut lending interest rates by 0.5-3 per cent this year, after the central bank cut the regulatory interest rate four times.