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Banks loosening conditions for providing loans
After many months of tightening credit, banks are now tending to push up lending by loosening conditions for loaning and offering ‘softer’ interest rates.
Following the move by state-owned banks, a lot of joint-stock banks have also announced lower lending interest rates. VIB Bank has announced it has cut VND and US$ lending interest rates by 0.5-3% per annum. Now the bank is providing VND loans at 18.5-20.5% per annum, and US$ loans at 8.5% per annum on average.
An Binh Bank has decided to slash VND lending interest rates by 0.75-2% per annum, now offering loans with the interest rates of 19-20.25% per annum. Meanwhile, the rates for US$ loans have been cut by 2-3% per annum, now hovering around 8-9% per annum.
Prior to that, Sacombank, Eximbank, Lien Viet and Techcombank all announced interest rate cuts.
General Director of ABBank Luu Duc Khanh said that banks now have begun loosening the conditions for providing loans as the national economy has shown signs of recovery and banks’ liquidity has improved.
The deputy director of a big joint-stock bank in HCM City said that businesses now have more opportunities to access bank loans than several months ago. This should be seen as good news for the national economy, as this will help businesses cut production costs, thus helping curb inflation.
Nevertheless, bankers are still hesitant with personal credit. The said bank deputy director said that a lot of clients need to borrow VND100-150mil to repair homes, but his bank has to ‘say’ no as the bank prioritises funding businesses’ production plans.
The deputy director said that consumer credit would not be the priority for banks at this moment as banks’ capital is not profuse enough to cover all types of credit products. Meanwhile, consumer credit would not be attractive to clients now due to the overly high interest rates. Last year, clients had to pay VND10 in interest for every VND100 of loans, while they now have to pay VND21.
However, some banks still are providing loans to fund personal purchase deals. Eximbank, Hong Kong and Shanghai Banking Corporation (HSBC) are providing loans to fund clients’ deals to purchase houses and cars.
As banks now have more profuse capital, they have been trying to expand credit, and considering resuming securities loaning. Eximbank has increased the volume of capital reserved for securities loans from VND200bil to VND800bil, Sacombank has reserved VND300bil for securities loaning, while ABBank VND150bil.
Sacombank’s representative said that it is now the right time for banks to resume securities loaning and push up lending as the national economy has shown signs of recovery and the inflation rate has been decreasing.
The general director of a joint-stock bank said that banks will think of boosting consumer credit last, while they now prioritise funding businesses’ production plans. He said that the absolute loosening of monetary policies would not occur until the end of 2009.
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