VietNamNet Bridge - The State Bank of Vietnam (SBV) policies on
interest rates over the past 12 months have led to increased production costs.
Deposit rates are limited while lending rates are self-determined by commercial
banks, says Vu Vinh Phu, Chairman of the Vietnam Supermarket Association.
Banks enjoy advantages from current monetary policies
With a 3-4 percent ratio between
borrowing and lending rates, in theory, banks can earn a profit. However, the
ratio has reached 8-10 percent in recent months. As a result, banks are
enjoying huge profits, but depositors and businesses are facing many
disadvantages.
Mr Phu claims that nowhere else
in the world has such an interest rate policy, especially in the context of the
economic downturn, rising inventories, weak purchasing power and people’s poor
living conditions.
According to Phu, if the deposit
rates are limited, the lending rates should be limited, too. Of course, he
says, there can be incentives for some prioritized cases. Otherwise, banks can
apply floating interest rates so that banking transactions can follow market
fluctuations.
In addition, policies and
information should be publicized, and the State should intervene in controlling
the price of goods produced by businesses that are dominating the local market.
The State should also take measures to prevent the possible resurgence of
inflation in the near future.
The Government has asked the SBV
to lower interest rates and it should ask the central bank to stabilize those
rates at an appropriate level. Dr. Ngo Tri Long, former Deputy Head of the
Price and Market Research Institute, says both basic and target should be taken
into account to prevent shocks from outside. Lowering interest rates does not
mean reducing requirements for loans or lowering credit quality. If the
interest rates are not lowered, a cycle of bad debt may appear soon.
Dr. Long affirms that the heart
of the matter does not lie in reduced interest rates. It will be meaningless if
the rates are lowered but businesses still find it hard to access loans. At
present, many businesses are suffering from high inventories and the consumer
price index (CPI) is falling.
Businesses still face difficulties
According to SBV statistics as of
June 30, new outstanding credit saw a year-on-year increase of 0.76 percent.
SBV Governor Nguyen Van Binh says the biggest challenge is dealing with slow
economic growth, which results in financial difficulties and decreased credit
growth.
Leading economist Nguyen Minh
Phong says high interest rates prevent businesses from accessing loans. Banks
are also hesitant to offer loans to local firms due to their rising bad debt
ratio.
The annual deposit rates are
currently maintained at 9 percent, but the lending rates are out of control.
Some businesses say they are enjoying an annual 13-percent, while others claim
they are unable to get such a rate.
At the moment, banks are dealing
with bad debt-related issues so they cannot offer loans for unfeasible
projects. In the immediate period, banks should be able to increase their
liquidity, thanks to their increasing deposit loans.
Dr. Nguyen Thi Lan from the
Financial Academy said the current bad debts are causing interest rates to rise
and slowing down credit growth. The SBV should complete its projects to purchase
bad debts and restructure banks. This means that bad debts which cannot be
withdrawn should not be bought, she adds.
VOV
Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programmes. Many thanks for visiting www.yourvietnamexpert.com and/or contacting us at contact@yourvietnamexpert.com
No comments:
Post a Comment