Commercial banks in Vietnam are likely to lower lending interest rates in the coming weeks, said a senior official of the State Bank of Vietnam.
Ho Huu Hanh, director of the SBV branch, said high interest rates have pushed loans out of reach for local firms, which have struggled with high production costs due to electricity and fuel price increase.
Interest rates on medium and long terms loans now range from 15% to 17% a year. But at some small lenders interest rates on dong-denominated loans have risen to as high as 20%.
Though lenders are not allowed to set their rates higher than 12% on short-term loans, many companies said they had been asked to pay up to 18% including various unofficial extra fees.
Some lenders avoid breaking the regulation by converting short term loans into medium and long term ones so that they no longer have to abide by the central bank’s lending rate cap.
Many firms said they cannot afford the current lending rates, suggesting that the rates should be between 13% and 14% per annum.
As local firms do not dare to borrow loans from local banks whereas the banks must cut the lending interest rates to secure profits as majority of their earnings still comes from lending activities.
Bankers earlier said they can’t lower the rates as they also have to pay more than the current deposit rate cap of 10.5% to attract enough funds.
Director of a Hanoi-based commercial bank, who declined to be named, said all banks announced similar deposit rates of no more than 10.499%, but in fact many of them had to offer bonus rates or else their clients would choose other banks.
Local lenders have recently asked the central bank to eliminate the cap deposit rates. The central bank, however, is not willing to take such a move, fearing that it could trigger a race among commercial banks.
Economist Tran Du Lich, a member of the National Financial and Monetary Policy Advisory Council, said lending rates of up to 20% a year are too high.
“There are certain business deals that can bring companies huge profits. But it’s not common. Most companies with normal operations can never afford such high rates.”
With dong loans becoming more expensive, local firms are switching to dollar loans to benefit from stable interest rates. As the dollar exchange rate is expected to be stable for a long time, dollar loans will be the better option to corporate clients.
The Ministry of Planning and Investment said in a statement at the government’s monthly meeting that total outstanding loans for the economy were up 2.95% at end-March from end-2009 and the broadest measure of total money supply, M2, rose 2.3%. (Saigon Economic Times)
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