BIDV cuts lending rate to 14.5%

The state-owned commercial bank has set the new lending rate at 14.5-15.5 percent, the fifth rate cut in the last 4 months and the 2nd within a month.

The newly revised lending rate is targeting exporters, agro producers, small and medium enterprises, and those affected by natural calamities.

The group of borrowers currently account for 40 percent of BIDV’s total outstanding loan of VND270 trillion.

It is an unusual move given the fact that all other lenders are maintaining the rate at 17-18 percent for the targeted groups, according to newswire Vneconomy.

With a 2.5 percent difference in its lending rate, the newswire questions how BIDV makes a profit with only 0.5-1.5 percent to cover all the operational costs.

Pham Quang Tung, deputy general director of BIDV, told the newswire that the bank was in a state of surplus capital, including non-term deposits at low costs and depositing rates.

The move is also aimed at supporting businesses by boosting liquidity in the peak season, which, in return, will help BIDV find new customers and expand its market share, he added.

BIDV’s decision is thought to pave the way for new rate cuts.

With a future credit growth of 15-17 percent, a decade low, and M2 growth of 14-16 percent for 2012, the central bank is still very consistent in containing inflation following the advice of international institutions including the World Bank and the International Monetary Fund.

The new target in credit and M2 growth has also taken into account the capacity to absorb the capital of Vietnamese economy. With 2011’s credit growth of 15 percent, the growth in gross domestic product this year has fulfilled the government’s target of 6-6.5 percent.

As a result, the meeting is expected to tackle the glut in capital flow for the coming year since the same 20-percent credit growth rate set for all banks this year have caused a stagnancy in capitals for the whole economy and affecting banks with surplus idle money.