Interest rate poised to ease

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SaigonTimes English - 79 month(s) ago 12 readings

HCMC – Many banks are considering easing their lending interest rates to support corporate clients given the dwindling borrowing demand, which barely increased in July.

Interest rate poised to ease

By Thuy Trieu - The Saigon Times Daily

HCMC – Many banks are considering easing their lending interest rates to support corporate clients given the dwindling borrowing demand, which barely increased in July.

Several banks said disbursement in the recent past was very slow as enterprises could not afford high interest rates at a time business turns more difficult.

Interest rate is falling

Central bank governor Nguyen Van Binh has lately observed that there are sufficient conditions for interest rate to drop, including stable liquidity and poor credit growth in July. The governor said the rate may fall to between 17-19% in September compared to the general rate of over 20% a year now.

A banker in HCMC agreed, saying his bank has pulled down the interest rate to 19.5% but disbursement is still slow. Meanwhile, another banker said the total amount of outstanding loans at his bank is falling.

He said enterprises are struggling with economic difficulties and thus restrict taking out loans, let alone non-production loans are still limited. “We may negotiate to lower interest rate to meet our clients’ desire,” he said.

Currently, the inter-bank rate is stable at 15-16%. Since July, several banks have kicked off promotion programs to relieve interest rate burden for their clients.

HCMC Housing Development Bank (HD Bank) has rolled out a program named “Preferential loans for supporting industries” with the annual interest rate down by 1-4 percentage points for enterprises active in the fields of automobile assembly, telecom-electronic devices, household appliances, mechanic and machinery, footwear and textile.

Asia Commercial Bank (ACB) has also launched a special credit program for individuals and households in need of capital. The program is applied for disbursements from August 1 to December 31.

The clients will enjoy an interest rate cut of 1.2 points per year for short-term loans or for big credits of VND500 million in HCMC and Hanoi, or VND300 million in other cities and provinces.

According to the central State Bank of Vietnam, the credit growth in July was 0.19% lower than the previous month, of which Vietnam dong credit dipped by 0.88% but it rose by 1.96% for foreign currency loans. Compared to end-2010, the credit growth as of end-July was 7.57% whereas the goal set for the whole year is 20%.

Interest rate still high

So far, there has been no sharp decline in interest rate due to high deposit rate at banks. Dam The Thai, deputy general director of HD Bank, said banks find it difficult to balance input and output rates though they have ample fund for lending. Those banks that still maintain a high deposit rate to keep customers find it even more difficult to lower the lending rate, he said.

An executive of a State-owned bank said his corporate clients cannot afford the high loan interest and revealed his bank could lower the annual rate to 19% at most. Another bank director also proposed the same interest rate, despite knowing this figure is still out of reach for many of his clients.

Experts suggested the central bank adjust money supply for banks through open market operations in order to fix the input interest rate at 14% per year. Therefore, banks can pull down their lending rates.

Governor Nguyen Van Binh informed the central bank would have solutions to harmonize the capital sources among financial institutions so as to ease the lending rate.

However, the international credit rating agency Fitch has recently warned to downgrade Vietnam’s rating if there is violation of commitments to tighten monetary and fiscal policies.

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