Major banks told to mean business in cutting rates

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Báo Tuổi Trẻ English - 35 month(s) ago 3 readings

Major banks told to mean business in cutting rates

State Bank of Vietnam Governor Nguyen Van Binh has recently ordered the group of 12 major banks that hold 85 percent of the credit market to provide genuinely low lending rates to local businesses, a move insiders hope can curb the ‘virtual interest rates’ phenomenon.

bank A sign shows that ACB is offering loans at reduced interest rates Photo: Tuoi Tre



The phenomenon refers to the fact that many banks ostensibly obey the Prime Minister’s order in early March to offer affordable loans for local manufacturers, but in fact they take every opportunity to reject the loans.

In the recent statement, the governor also said credit institutions are required to report their lending disbursement to the central bank via its Monetary Policy Department.

Low rates?

Most banks have cited inadequate loan application to turn borrowers down, said Tran Van Duong, director of An Thai Duong Co, an agricultural product exporter.

“The bankers appear to be fault-finders, and reject the application right away should they find a single mistake,” complained Duong.

Even when no faults are detected, Duong added, the bankers will excuse that their outstanding loans have met target, and borrowers thus have to wait for the final decision from the bank chiefs.

“An agriculture product exporter, we are eligible to borrow at 17 percent a year as offered by a bank, but still cannot make it,” he said.

Sharing the same fate, V., director of a Binh Duong-based wood manufacturer, said he was repeatedly rejected by banks, which announced loans at attractive lending rates.

“The company still had to borrow at 19 – 22 percent,” he said.

Meanwhile, Nguyen Van Lanh, deputy director of Phuc Thinh Vina Co Ltd, said he was told to completely settle the old debt, which he had borrowed at 23.5 percent a year, to be able to access another loan with lower interest rates.

“The bank officers said they have heard of the news of slashing lending interest rates, but have yet to be officially informed by their headquarters,” said Lanh.

Wooing borrowers

Many banks have recently wooed borrowers by offering a rate cut on the first three months of the loan, a trick experts say involves high risk, since the normal interest rates will be applied from the fourth month.

Normal lending rate is usually the deposit interest rate for 12-month term, plus a margin of 6 to 8 percentage points, which means the final figure is more than 20 percent a year, experts warned.

Banks even do not deny the trick.

“It is the interest collected from old borrowers that mainly contribute to banks’ hefty profits,” revealed a deputy CEO of a major commercial bank based in Ho Chi Minh City.

Even when lending rates on the banking market fall down, banks will only cut rates for new borrowers, he added.

“They will offer a slight rate cut to keep customers, but the slashed amount is inconsiderable.”

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