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BIDV recommends cap on lending interest rates
The Bank for Investment and Development of Viet Nam (BIDV) yesterday suggested capping lending interest rates to restrict firms’ escalating costs.
BIDV chairman, Tran Bac Ha, told reporters he had put the idea to the State Bank of Viet Nam with a view to reeling in inflation.
Under the proposal, short-term loans in dong for manufacturers would be capped at 15.25 per cent interest per annum whereas the same loan for exporters would draw the line at 14.75 per cent. Annual interest for both medium and long-term loans would be roped off at 15.75 per cent.
The BIDV recommends maximum annual interest of 8.50 per cent for all loans in US dollars.
The ceiling rates for lending interest take into account all capital mobilisation fees, capital reserve and 12-15 per cent return on equity.
State-owned banks have charged up to 16 per cent per annum for long-term loans in dong while joint stock commercial banks have charged up to 21 per cent for the same loan.
Such interest rates are hurting borrowers where it counts: in the pocket, and reduce the impact of previous monetary policies to curb inflation.
The current deposit interest rates stand at 11 per cent and 6 per cent for the dong and US dollar, respectively.
In terms of credit growth, chairman Ha asked the central bank to clarify its regulation of 30 per cent credit outstanding loans.
Both state-owned banks and joint stock banks are unsatisfied with the limitation.
"Confusion exists about whether the 30 per cent outstanding loan applies to the entire year or specific terms," Ha said.
Loans for exporters, for instance, are predicted to increase rapidly, sending outstanding loans over 30 per cent, yet some banks still keep total outstanding loans under the 30 per cent threshold.
Ha proposes fostering 30-35 per cent growth for State-owned banks, saying: "State-owned banks are vitally important to the economy, hence they need more support than other areas."
Commenting on exchange rate policies, the BIDV has asked regulators to double the daily trading band up to +/-2 per cent to meet real demand.
Over the past few weeks, the real USD/VND exchange rates has fluctuated around +/-2.5 per cent versus the exchange rate listed by the central bank. The central bank has only allowed a +/-1 per cent daily trading band on the official market.
A strongly appreciated dong could widen the trade deficit while a strongly depreciated dong increases the pressure to pay back foreign loans, Ha said.
He expects the central bank would soon offer short-term loans in US dollars to support international trade: exports and essential imports.
Meanwhile, the Government has considered reducing corporate income tax from 28 per cent to 25 per cent for certain enterprises.
BIDV suggests the Government add commercial banks to the list of those enterprises.
Ha explained that a combination of inflation and ceiling rates was trimming the profit of commercial banks. BIDV’s profit, for instance, is predicted to shed VND500-700 billion ($31.25-43.75 million) this year.
VNS
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