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Interest rate controls must be minimised, co-ordinated
The State Bank on April 16 decided to lift the ceiling of 12 per cent in place on the interest rates commercial banks can offer to depositors. Meanwhile, banks continue to charge rather high lending interest rates to the detriment of borrowers. The general secretary of the Viet Nam Banks Association, Duong Thu Huong, spoke about interest rate policy.
How co-ordinated are Government bodies in implementing interest rate policy?
I cannot emphasize enough the importance of co-ordination in implementing effective monetary policies. We must attempt to form a united front in the battle against inflation as segmentation leaves us vulnerable. Regrettably, until now co-ordination has been patchy.
Banks are now offering high lending interest rates. Will VNBA look to capping lending interest?
VNBA only tries to tame the cost of mobilising deposits for banks. We shouldn’t impose a ceiling rate for lending interest as banks have different ways of operating and different capital structures. For example, banks which receive more deposits from large enterprises than from individuals often charge lower lending rates than other banks.
The Asian Development Bank and the International Monetary Fund predict that inflation could exceed 15 per cent by year-end. How would it affect the real interest rates?
Suppose their predictions come true, and if banks choose to offer real deposit rate above zero, then nominal rates should be 18 per cent per annum, not 11 or 12 per cent. However, we ought not to pursue positive real interest at the moment.
If people want positive real interest, enterprises will pay dearly in increased production costs as lending interest will be over 20 per cent. Around 85 per cent of local producers rely on credit loans, and it’s these firms that stand to lose the most from positive real interest.
A recent government report stated "looking forward to a positive real interest", not "ensuring positive real interest" as previously stated.
Banking experts warn that administrative interference may distort the market. Do you share this view?
I agree with them as our economy has come a long way in terms of integrating into the world economy. A truly independent banking sector needs little market control. However, occasionally an economy does require a certain degree of "manipulation".
Inflationary spiral is rife in other Southeast Asian countries too, as the price of commodities rises worldwide. Certain administrative intervention is necessary to stabilise prices on the local market. Such intervention will be gradually phased out once inflation cools.
VNN
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