Vietnam - Banks don’t want to ease loan interest rates

VietNamNet Bridge – The government is considering slashing the lending interest rate to 10 percent in an effort to rescue businesses which have been thirsty for capital. However, this has not been welcomed by commercial banks, which say they would not make profits with the interest rates.

Offering preferences, but in dribs and drabs

Though it is now the high year-end production season, banks still have been reluctant to launch the credit packages with preferential interest rates.

Only in late November 2012, did Sacombank launch the credit package worth one trillion dong applied to the enterprises and households which join the program on stabilizing the goods prices on Tet holiday.

Under the credit program, the lending interest rate is just 10 percent per annum in the first three months. However, the loans would be matured after six months at the latest, because the program would only last until the end of January 2013.

In October, Eximbank announced the credit package of 4500 billion dong with the interest rates of 9-10 percent per annum for import-export companies and the enterprises in the supporting industries.

Reporters have found out after visiting some bank branches on Lang Ha Road in Hanoi, that there have been very few preferential lending program for enterprises and business households in the Tet sale season.

Techcombank is now running a program on providing capital flexibly to small and medium enterprises. There are two options for businesses. They either can borrow money for six months within credit limits, or borrow money for 12 months, but the values of the loans would be lower.

Businesses now can borrow money at the interest rates of 14-15 percent per annum, while individuals have to pay 16-17 percent per annum.

VIB Bank, after two weeks of making public the lending interest rates and setting the highest lending interest rate at 15 percent per annum, has raised the rate to 15.79 percent per annum.

Only the new clients, who borrow money to buy houses, or business individuals can access the preferential loans with the interest rates of 9.9 percent per annum for the first three months.

However, they have to mortgage assets for the loans, have good business result and feasible business projects.

Other commercial banks set the lending interest rates at 16-17 percent and strict requirements on borrowers.

Interest rate reductions would make banks incur loss

While businesses have repeatedly urged banks to slash the loan interest rates, bankers still keep quiet, while only offering some credit programs with preferential interest rates.

A deputy director of a bank frankly said no bank wants to ease the interest rates, because this would affect their profits.

The banker said that with the margin between the lending and deposit interest rate at 3-4 percent per annum and the ceiling deposit interest rate of 9 percent, the ceiling lending interest rate would be 13 percent per annum. However, the interest rate would not satisfy banks, and they would charge additional fees to raise the actual interest rate to 15 percent per annum.

In principle, when banks pay 8 percent for deposits, they would be able to make profit if they have the margin of 3-4 percent. However, in fact, banks had to spend higher cost for the capital mobilization, for the provisioning against risks, and debt settlement.

Dr Nguyen Tri Hieu, a banking expert, also said the margin of 3-4 percent would not be high enough to make profit, while some banks may even incur loss.

Tien Phong

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