Banks steadily slash lending rates

Banks steadily slash lending rates

By Thanh Thuong - The Saigon Times Daily

HCMC – Local lenders are steadily cutting lending rates for old loans to below 15% annually in response to central bank governor Nguyen Van Binh’s suggestion, while the borrowing cost of new loans is staying around 13-15% a year.

As explained by the governor at the conference ‘Connecting banks and enterprises’ late last month, lowering lending rates for old loans is not an administrative decision but a suggestion from the central bank. Now a large number of banks are considering rate cuts but they all assert only lending rates of recoverable debts will be pulled down.

Nguyen Thanh Toai, deputy general director of Asia Commercial Bank (ACB), said his bank has revised down rates for nearly 20,000 credit contracts from firms and individuals in line with the rate cut direction. ACB is taking other loans into account to slash rates as well, Toai stated.

Meanwhile, borrowing costs of new credits at ACB are mainly fixed at less than 15% a year. Toai deemed rate cuts necessary to boost credit growth of the bank in the rest of the year, as this lender’s credit growth in the year’s first half stayed at only 0.9% compared to the whole year’s target of 17%.

An executive of a small bank told the Daily lending rates at her bank have been slashed sharply.

The bank has pulled down the borrowing cost for four priority groups to a mere 14% per annum, she said. Moreover, it is also working to reduce the annual rates of old loans to below 15%, she noted.

According to the staff, yearly lending rates at her bank fluctuate in the range of 13-16%.

Another banker in HCMC revealed his lender’s lending rates are around 14-17% a year. Borrowing costs of old debts have gone down but only half of the total number of credit contract have been given the preferential treatment.

“Cutting lending rates for enterprises will help banks enhance the relationships with customers, so the former will not neglect the job,” he pointed out.

Lending rates at credit institutions in HCMC are in the range of between 10.5% and 15% as recorded by Nguyen Hoang Minh, deputy director of the HCMC Branch of the central bank. As per a report of the central bank’s branch, around four to five lenders in the locality, mainly small ones, have yet to pull down old loan rates to less than 15% per annum as requested by the central bank.

Minh, however, said he believed these lenders will also reduce lending rates subject to their financial situations soon.

On Monday the central bank announced the current lending rates at 69 credit institutions which are holding a combined market share of 90% (See table below). The ratio of loans with lending rates of over 15% has tumbled to 29.1% from the 65.3% before the middle of last month.

The strongest rate cuts are seen at the group of five State-run commercial banks and joint stock commercial banks with majority State holdings.

The central bank’s report on lending rates in HCMC