Banks stop lending
Believing that the current ceiling lending interest rate is lower than the previously applied interest rates, some commercial banks have stopped providing new loans, while others are trying to collect ‘management fees’ from borrowers.
With the latest decision by the State Bank of Vietnam, the ceiling interest rate of 12% per annum was removed, which means that from now on, commercial banks have the right to raise deposit interest rates as high as they want. However, when the ceiling deposit interest rate was removed, the ceiling lending interest rate was set up, at 18% per annum.
The problem lies in the fact that previously, banks did not meet any barrier in setting up lending interest rates, and they all lent at rates higher than 18%. Therefore, banks have stopped providing new loans as they said they would incur losses if they keep lending interest rates below 18%.
Eximbank said that the bank is only considering applications for loans that were made previously, while it is not providing loans for new projects.
An Binh Bank applies the lending interest rate of 18% per annum (1.5% per month), but it collects fees for the loans, which make the real interest rate as much as 1.8% per month. The bank has stopped funding real estate deals.
South East Asia Bank collects 0.9% in ‘credit management fees’. As such, borrowers have to pay 2.4% per month for loans.
Saigon-Hanoi Bank is requiring the fee of 0.3% for credit management and 0.5% for project appraisal, which means that borrowers have to pay 0.8% more. An official of the bank said that previously, the bank lent at interest rates as high as 27.6% per annum.
Some banks have announced the lending interest rate of 18% per annum, but collect additional ‘management fees’ from borrowers, which makes the real lending interest rates higher than the allowed level of 18% per annum.
A representative of Maritime Bank said that previously, the bank lent at 19.2% per annum, or 1.6% per month.
He said that the bank will continue loaning, but it will set stricter requirements on mortgaged assets and other conditions.
The move by banks of stopping providing loans have been making small- and medium-size enterprises, who have been relying on bank loans, suffer.
The director of a fine arts company in district 12 in HCM City complained that he did only one thing in the last few days: go to banks to persuade banks to give loans. “Several banks shook their heads, while others told me to wait, but I can’t wait anymore. I need capital to fulfill my signed contracts,” he said.
Tran Bich Hang, the owner of a garment export company in district 8, also complained that her applications for loans have not received answers from banks, while she needs VND250mil urgently to cover expenses.
“The bank that I contacted, promised to consider providing loans. However, it announced on May 20 that it would postpone loaning. I still don’t know how to manage to get money to pay workers and pay for other expenses.
Le Duc Ngoc, the owner of Thai An Garment Enterprise, said that he has borrowed VND900mil from a bank since mid 2008. Every month, the enterprise has to pay VND10mil of interest. However, the bank has announced the interest rate increase of 0.2%, which means that he has to pay VND2mil more every month.
Chairman of the HCM City Real Estate Association Le Hoang Chau said that the ideal interest rate for real estate businesses is 10% or a little higher, while the currently applied ceiling lending interest rate of 18% proves to be unbearable for businesses.
Director of Phuc Duc Real Estate Company Lam Van Chuc said that companies only borrow money now to try to survive, while no one dares borrow money now to expand production.
VNN
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