Vietnam Central Bank to Remove Loan Rate Cap Soon
The State Bank of Vietnam will issue a circular soon that will allow commercial banks to provide medium and long-term loans to clients, based on negotiable interest rates.
The circular will be issued in a few days in line with a National Assembly decision and a Prime Minister directive, Nguyen Ngoc Bao, head of the SBV Monetary Policy Department told an online conference Feb 23.
Under the circular, commercial banks will be permitted to provide medium and long-term loans in Vietnam dong at negotiable lending interest rate, besides those in foreign currencies.
Bao declined to comment about the purpose of the SBV move to apply the negotiation-based interest rate scheme.
Analysts believed that such policy change will be aimed at improving bank profit margins and liquidity and ending a practice of unlawful lending agreements.
Others, meanwhile, feared that the monetary market may be distorted by the decision.
Once the negotiation-based scheme is applied to medium and long-term loans only, lenders will dodge the laws and turn short-term loans into medium and long-term ones in order to apply higher interest rates, they explained.
Commercial banks are currently allowed to raise lending interest rates at 1.5 times of the base rate which has kept unchanged at 8% per annum since December last year.
Negotiable lending interest rates are now being applicable for loans made in U.S. dollars, credit cards and consumer. (VnEconomy)
Vietnamese
