Vietnam Banks Have Not Reduced Lending Interest Rates-Report

Commercial banks have not lowered its lending interest rates to date despite their rates for deposit were cut to 11 per cent per annum on dong and 6 per cent on U.S. dollar, pursuant to an agreement reached by members of the Vietnam Banking Association (VNBA).

 

As banks had to mobilize capital at high interest rates, they will lend at high interest rates in order to ensure profit. It is expected that the lending interest rates will not be adjusted for another month.

 

Analysts believe that lending interest rates will not go down in the near future for many reasons.

 

The government has instructed state owned banks to transfer VND52.778 trillion of the state’s money deposited in the banks to State Bank of Vietnam (SBV) branches for management.

 

This will cause a capital shortage of VND25 trillion billion for domestic commercial banks, up VND5 trillion against the total sum they had to pay for the compulsory treasury bills on March 17 as required by the State Bank of Vietnam.

 

Lending interest rates are forecast to go down by the end of this year once the domestic monetary market becomes stable.

 

Changes in the lending and borrowing rates for credit have topped discussion at recent session of the NA Standing Committee, most committee members of the committee agreed the interest charged by lending institutions not to exceed 300 per cent of the lowest interest rate paid to purchasers of treasury bonds.

 

The rate would replace the “base rate” set by the country's central bank on the Decision No.479 by SBV which stipulated that the base VND interest rate for March 2008 would be 8.75 per cent.

 

As a result, commercial banks must not lend at interest rates higher than 8.75 x 150 per cent = 13.125 per cent.

 

However, the real lending interest rates commercial banks are now applying are much higher than 13.125 per cent, at 18 per cent-20 per cent on average. (Local sources)