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Ceiling interest rate doesn’t benefit anyone: bankers
Commercial banks have been criticizing the Vietnam Banking Association (VNBA) for imposing the illogical ceiling interest rate on them, causing the capital supply tension.
The bankers said that VNBA’s insisting on the ceiling interest rate scheme shows that the association does not stand for banks’ interests. They all believe that the 11% ceiling interest rate agreed by VNBA and 12% ceiling rate imposed by the State Bank of Vietnam will both be broken.
Since the beginning of April, when banks began applying the ceiling interest rate of 11%, the deposits made at banks began decreasing. A banker in HCM City said that the deposits at his bank have decreased by VND40bil/day in recent days.
People do not make deposits at banks any more as they cannot get profit with such low interest rates and such a high inflation rate. Many people, anticipating that the ceiling interest rate would be broken, have drawn back money to keep under their pillows, waiting for the interest rates to increase.
According to the HCM City Branch of the State Bank of Vietnam, over the last half month, since the 11% ceiling interest rate was applied, the mobilized capital by local banks has reduced by VND9,225bil over the beginning of the month. The risks of banks losing liquidity tend to increase.
Though commercial banks affirm that they still can ensure the balance of the mobilized and lent capital, the report by the HCM City Branch of the State Bank of Vietnam showed that a lot of banks have the loans exceeding the mobilized capital. A small bank was even found as having lent as much as twice the capital it has mobilized.
While persuading commercial banks to apply the ceiling interest rate of 11%, VNBA said that this will help curb inflation and help reduce the capital mobilization cost. However, bankers do not think that the ceiling interest rate scheme can help them, but see the scheme as the barrier to their capital mobilization.
A bank in HCM City, which has been upgraded from a rural bank into an urban bank, has revealed that it is planning a big promotion program, which will be launched ‘when there are favorable conditions’. The bank is preparing two projects with the interest rate of 12% and higher if possible.
Leaders of the bank said that other banks in the city are also getting prepared for the new interest rate increases, which they will implement right when the ceiling interest rate scheme is removed.
General Director of An Binh Bank said that the most important thing now is that the national economy needs to run in accordance with the laws of supply and demand. As the central bank has drawn back a big volume of cash from circulation to fight against inflation, banks are finding it very difficult to arrange enough capital for their credit activities.
Pham Anh Dung, General Director of Saigon Joint Stock Bank, said that the ceiling interest rate of 11% would not benefit anyone. This will not help enterprises borrow money at lower interest rates, vice versa, this will make loans inaccessible to businesses.
Meanwhile, VNBA still insists on the need of maintaining a ceiling interest rate. On April 18, VNBA sent a document to its members, calling on them to keep the 11% ceiling interest rate, though banks complained that they are seriously lacking capital. Bankers even said that the agreement on the 11% ceiling interest rate was the ‘imposing agreement’ as it was arranged by VNBA.
A lot of banks, answering the questions of reporters, confirmed that they strongly opposed the ceiling interest rate scheme. “We are now still applying the ceiling interest rate because we respect the association. However, if the situation cannot be improved, we will have to raise the deposit interest rates,” they stated.
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