The State Bank of Vietnam has reported that the interbank interest rates for many kinds of loans have dropped to below 10 percent. Banks now can borrow at the interest rates of 8-9 percent per annum for 12 month term loans. The interest rates for one and two week loans are 8.67 percent and 9.75 percent, respectively.
However, banks still have to pay more than 10 percent per annum for other loans with the highest interest rate at 13.14 percent per annum, applied for 3 month term loan.
Bankers have also said that the interest rates have been decreasing significantly. However, they said it is still difficult to borrow money on the interbank market, because of the strict requirements on the collaterals.
Meanwhile, the State Bank of Vietnam has requested big banks to cut down expenses by 5-10 percent in order to be able to slash the lending interest rates, step by step. The big banks include Agribank, VietinBank, Vietcombank, BIDV and MHB. All of the five are either state owned banks or joint stock banks, in which the State holds more than 50 percent of the chartered capital.
In fact, right after the State Bank released the decision to lower the dong ceiling deposit interest rate by one percent in early March 2012, the above said banks all have announced the 1-2 percent lending interest rate reductions.
Dr Tran Du Lich, a well-known economist, Member of the National Advisory Council for the Finance and Monetary Policies, said on Dau tu, that once the ceiling deposit interest rate went down, banks would have to slash the lending interest rates in order to push up lending. Since early February, the credit has not increased because of the overly high lending interest rates.
Ceiling deposit interest rate may be removed in June
As the interest rate is on the decrease, experts have called on to remove the ceiling deposit interest rate mechanism, emphasizing that the non-market measure should not be applied in a market economy.
Le Trong Nhi, a well known economist, has noted that the State Bank of Vietnam is still hesitant to remove the ceiling interest rate mechanism, fearing that if the bank does this now, the interest rates may skyrocket, because small banks, which are facing liquidity problem, will raise the deposit interest rates. This would trigger a new interest rate race.
Tran Hoang Ngan, Member of the National Advisory Council for Finance and Monetary Policies, in an interview given to VnExpress, said that the ceiling deposit interest rate mechanism should not be removed until June, because the current problems would be fixed only by that time.
Meanwhile, General Director of Eximbank Truong Van Phuoc, also thinks that the central bank has its own reason to keep cautious with the move to remove the ceiling interest rate mechanism, since weak liquidity remains a big problem for many banks.
“The interest rates would go down in the future, but it’s still unclear when,” Phuoc said.
He went on to say that the State Bank needs to speed up the process of restructuring banks to stabilize the system. If the job can be done well, the lending interest rates may go down to 15 percent by July or August. If so, the deposit interest rates would go down as well. In general, banks do not care much about the interest rates, but care more about the gap between the deposit and lending interest rates.
Phuoc has warned about the high possibility of the high inflation returning. Consumer goods prices have been increasing sharply after the fuel price increases. Meanwhile, the interest rate reductions should be seen as a threat to the inflation.
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