Banks would not slash interest rates unless they are forced to do so

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VietnamNet English - 31 month(s) ago 5 readings

Banks would not slash interest rates unless they are forced to do so

VietNamNet Bridge – Businesses, economists and bankers all have raised doubts about the application of the fixed interest rate margin set up by the State Bank of Vietnam.




The State Bank of Vietnam last week worked out with 14 commercial banks on the measures to slash the lending interest rates and apply the ceiling interest rate margin of 3 percent for four preferential groups of borrowers.

This means that the lending interest rate should not be higher by three percent per annum than the deposit interest rate. The four preferential groups of borrowers include export products, agriculture production, supporting industries and small and medium enterprises.

The request has been made after enterprises and business associations repeatedly complained that they cannot access bank loans. Cao Sy Kiem, Chair of the Small and Medium Enterprises’ Association, emphasized on Tien phong newspaper that businesses now need the interest rates low enough to help them revive production, rather than the bail package.

Dau tu has quoted Tran Xuan Chau, Deputy Director of the Credit Department under the State Bank of Vietnam, as saying that the three percent threshold has been set up after considering the input interest rates, the conditions of the four preferential economic sectors and the current economic situation. Big banks, especially state owned ones, have been told to restructure the capital sources to get adapted to the new interest rate margin of 3 percent.

As for other economic sectors, banks can provide loans at negotiable interest rates.

VP Bank’s General Director of VP Bank Nguyen Hung has affirmed that there would be no problem with the bank in implementing the new regulation. VP Bank has launched a credit package of 5 trillion dong with preferential interest rates applied to the four economic sectors, while the sum of money has not been used up.

Tran Bac Ha, President of the Bank for Investment and Development of Vietnam BIDV also said three percent is a reasonable margin. The credit expenses are about 2.6-2.7 percent which is paid for workers’ salaries, compulsory reserves and some other items.

Some businesses have commented that banks should ease the lending interest rates in order to boost lending, especially when they now have profuse capital and few clients. Thoi bao Kinh te Vietnam has quoted its sources as saying that commercial banks now have capital in great excess.

Also according to Ha, while suggesting the 3 percent ceiling interest rate margin, the State Bank also asked banks to set up the interest rate margin of no more than six percent for other normal loans.

Nevertheless, the request by the central bank has not been responded by small banks. Manager of a joint stock bank has commented that by making the request, the central bank has set up the ceiling lending interest rate after it fixed the deposit interest rate.

“This would only benefit big banks,” he said.

Even medium-class bankers have also said at the recent meeting with the State Bank that they do not want the 3 percent ceiling interest rate margin. Some banks have warned that they would leave the capital idle if they are forced to fix the margin interest rate at 3 percent.

While businesses feel excited when hearing the information about the new ceiling interest rate margin, commercial banks still keep calm about it.

Businesses have got impatient about the delay of banks in easing interest rates. However, analysts have said that once banks refuse to apply the ceiling lending interest rate, this means that they still have problems with liquidity, and only when the problem is settled, will they be able to offer lower interest rates.

C. V

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