HCMC – Enterprises’ enthusiasm to enjoy a lower borrowing cost is poured cold water as it turns out that promises from bankers are just the lip service, since very few clients can access the lending rate of 17%-19% a year.
Lower lending rate still beyond most borrowers’ reach
By Vo Nguyet Minh - The Saigon Times Daily
A client makes deposit at a bank in HCMC. Most enterprises say it is difficult to enjoy a lower lending rate of between 17% and 19% as intended by the State Bank of Vietnam - Photo: Minh Khue HCMC – Enterprises’ enthusiasm to enjoy a lower borrowing cost is poured cold water as it turns out that promises from bankers are just the lip service, since very few clients can access the lending rate of 17%-19% a year.
Most enterprises contacted by the Daily said they had to shy away from the offered rate of 22%, which is preventively high for any wanting to invest in production.
Nguyen Thanh Nhan, deputy director of Ngoc Kim Chau Trading Co., said the top five banks he approached asked for a lending rate of 22.25% for Vietnam dong and 9.25% for U.S. dollar loans.
“Until now, announcements (of lending rate cuts) are merely announcements, and we have not received any notice on a rate cut,” Nhan told the Daily.
Nguyen Tri Kien, director of Minh Tien Company specializing in bags production, said he was still offered a rate of 22%. He however noted that some banks had informed him of a lower lending rate after one more month.
Soft rate for selective clients
A credit officer of a bank in HCMC ascertained that the lower rate of between 17% and 19% a year had applied, but lending conditions had been tightened including a shorter term of less than one year.
Several other banks said they could offer the lower rate to ‘good clients’ only.
Truong Van Phuoc, general director of Eximbank, said his bank had disbursed some VND500-600 billion at a lower rate for borrowers, on the conditions that such enterprises had good business records and made commitments to sell foreign currencies back to the bank later.
An executive of a State-owned bank in HCMC said his bank had lowered the lending rate to 18%, or even 17%, but the disbursements remained low, at tens of billions of Vietnam dong since there were few good customers.
“Most of the borrowers were those old customers who returned to the bank after suspending ties for a while due to high interest rates. New customers can only borrow funds if they are rated very good clients,” he said.
He added that the lending conditions had stiffened, including a transparent financial statement, a sound business situation at the moment, and sufficient assets as collateral.
Furthermore, banks do not have ample funds for lending as before given the ceiling deposit rate cap of 14% enforced by the central bank last week.
Rates still high
Even if the lower lending rate of 17%-19% is widespread, enterprises especially small and medium ones still find it unaffordable given the unsound business environment now.
Pham Ngoc Hung, vice chair of the HCMC Business Association, said most enterprises under the association’s umbrella dared not take out loans now as their rate of return hovered around 10% only.
“Many small enterprises are mired in stagnation, including several having shut down business temporarily. Only bigger enterprises or those in dire need of funds dare approach banks for loans now,” Hung said.
A senior executive of a steel mill said that given the economic uncertainty, the best way is to scale down production and look for ways to repay debts rather than to take out new loans,” said the executive.
In a meeting in Hanoi last Thursday, the central bank ordered all banks to conform to the ceiling deposit rate cap of 14%, which the governor said was a necessary step to lower the lending rate to between 17% and 19% a year right from this month.