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Banks in race to reduce interest rates
Three banks sharing the largest segments of the domestic market have consecutively decided to slash their lending interest rates, jostling other minors to enter the race to also reduce their loan rates.
In early July, the Bank for Development Investment of Vietnam (BIDV) pioneered the move, cutting its foreign currency lending rates by 2 percent per annum and Vietnamese dong by 0.2-0.6 percent a year.
Following BIDV’s lead, the Vietnam Bank for Agriculture and Rural Development (Agribank) and the Bank for Foreign Trade of Vietnam (Vietcombank) made similar changes on July 17.
Agribank reduced its lending interest rates in US dollar and Vietnamese dong by 2 percent and 0.5 percent per annum, respectively, while Vietcombank dropped its rates to 0.5 percent and 1 percent per annum, respectively.
Though they claimed the rate reduction would affect the business efficiency, the three banks said their decisions would also help enterprises get loans at more rational interest rates in order to recover and develop their production, thus making the economy regain its rapid and sustainable growth rate.
Economists at a July 15 seminar on market and prices management for curbing inflation also agreed the rates cut would put the banks in disadvantage in the short term but benefit them in the middle and long term.
In addition, the market has shown positive signals, particularly in US dollar transaction, and this has persuaded commercial banks to consider their rate cuts.
Presently, loans in US dollars in the inter-bank market are available at decreasing interest rates, standing at around 2-2.5 percent per annum for a duration of 1-2 days as compared with the rate of 3.8-5 percent per annum in late April.
Meanwhile, the demands for loans in USD for importing goods, particularly luxury cars, have been decreasing, softening the tension of foreign currency demand on the market. By July, the total debts in USD reduced by 0.3 percent as compared with that in late May.
The USD exchange rate on the free market also plummeted from its peak at 19,500 VND per one US dollar in mid-June to 16,880 VND per one US dollar on July 17, close to the inter-bank exchange rate, helping stabilise the market.
However, according to Academy of Finance Deputy Director Nguyen Thi Mui , the interest rate cut should not “follow the crowd” but must be based on the situation in each bank.
According to the State Bank of Vietnam , the volume of deposits in VND is not equal between banks.
Big banks’ capital reserves are currently exceeding the required levels while some joint stock commercial banks have not met the requirements and have to use interest rates as tools for adjustment, leading many commercial banks to believe the interest rates for deposits in VND will not drop in the near future.
Banks in race to reduce interest rates
18/07/2008 -- 7:27 PM
Hanoi (VNA) – Three banks sharing the largest segments of the domestic market have consecutively decided to slash their lending interest rates, jostling other minors to enter the race to also reduce their loan rates.
In early July, the Bank for Development Investment of Vietnam (BIDV) pioneered the move, cutting its foreign currency lending rates by 2 percent per annum and Vietnamese dong by 0.2-0.6 percent a year.
Following BIDV’s lead, the Vietnam Bank for Agriculture and Rural Development (Agribank) and the Bank for Foreign Trade of Vietnam (Vietcombank) made similar changes on July 17.
Agribank reduced its lending interest rates in US dollar and Vietnamese dong by 2 percent and 0.5 percent per annum, respectively, while Vietcombank dropped its rates to 0.5 percent and 1 percent per annum, respectively.
Though they claimed the rate reduction would affect the business efficiency, the three banks said their decisions would also help enterprises get loans at more rational interest rates in order to recover and develop their production, thus making the economy regain its rapid and sustainable growth rate.
Economists at a July 15 seminar on market and prices management for curbing inflation also agreed the rates cut would put the banks in disadvantage in the short term but benefit them in the middle and long term.
In addition, the market has shown positive signals, particularly in US dollar transaction, and this has persuaded commercial banks to consider their rate cuts.
Presently, loans in US dollars in the inter-bank market are available at decreasing interest rates, standing at around 2-2.5 percent per annum for a duration of 1-2 days as compared with the rate of 3.8-5 percent per annum in late April.
Meanwhile, the demands for loans in USD for importing goods, particularly luxury cars, have been decreasing, softening the tension of foreign currency demand on the market. By July, the total debts in USD reduced by 0.3 percent as compared with that in late May.
The USD exchange rate on the free market also plummeted from its peak at 19,500 VND per one US dollar in mid-June to 16,880 VND per one US dollar on July 17, close to the inter-bank exchange rate, helping stabilise the market.
However, according to Academy of Finance Deputy Director Nguyen Thi Mui , the interest rate cut should not “follow the crowd” but must be based on the situation in each bank.
According to the State Bank of Vietnam , the volume of deposits in VND is not equal between banks.
Big banks’ capital reserves are currently exceeding the required levels while some joint stock commercial banks have not met the requirements and have to use interest rates as tools for adjustment, leading many commercial banks to believe the interest rates for deposits in VND will not drop in the near future.
VNA
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