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Borrowing costs to fall further: banks
Recent moves by the central bank will help commercial banks make further cuts in their lending rates next month, bank officials say.
Truong Van Phuoc, general director of Eximbank, or the Vietnam Import Export Bank, says when the State Bank of Vietnam applies the new 5 percent interest rate on commercial banks’ compulsory reserves against dong deposits next month, the Return On Assets ratios (ROA) of banks will increase.
Moreover, as credit organizations will be allowed to use compulsory bills as security for their lending from October 1, their liquidity will improve, he says.
On March 17 the SBV had instructed 41 commercial banks to buy bills worth VND20.3 trillion (US$1.23 billion) with a coupon rate of 7.8 percent to drain liquidity and curb inflation.
Phuoc says he expects annual lending rates to be lowered to around 18-19 percent, instead of the current 21 percent.
The central bank’s moves will benefit commercial banks. They also prove that monetary policies need not be tightened anymore, says general director Ly Xuan Hai of Asia Commercial Bank, Vietnam’s fifth-largest lender.
According to Tran Phuong Binh, general director of DongA Bank, lending rates next month will be lowered partly in response to the central bank’s moves, but the main reason is that businesses can no longer suffer high interest rates.
Le Dac Son, general director of the Hanoi-based Vietnam Commercial Bank for Private Enterprises, known as VP Bank, says the economy has stabilized recently, with the consumer price index in September recording the lowest increase this year at 0.18 percent over August. Banks no longer have to struggle with liquidity, he adds.
However, both lending and deposit interest rates are still high, he says, noting banks themselves think that lending rates are too high for businesses. As a result, many businesses have no choice but to reduce production or change their plans.
The recent decisions of the central bank will provide commercial banks a chance to lower their lending rates and thus share the difficulty with businesses, Son says.
All banks have already planned to cut interest rates so that businesses can access loans and go on with their planned projects, and Son feels the maximum lending rate will be 20 percent.
Son says banks can make further cuts in lending rates in the next few months by gradually lowering interest rates on deposits rates.
The cost of borrowing can also be reduced, without any effect on anti-inflation measures, if the central bank continues increasing the interest rate it pays on banks’ compulsory reserves.
“In order to ensure enterprises can obtain banks loans to maintain their business and make profits, lending rates should be lowered to 18 percent by the end of this year,” he says, noting the development of business is important to the economic growth next year.
Last week the SBV announced it would raise the interest rate on compulsory reserves to 5 percent from the current 3.6 percent with effect from October. The State bank’s governor Nguyen Van Giau said the increase, the second this year, aims to help commercial banks cut their lending rates.
Last month the central bank had increased the rate to 3.6 percent from 1.2 percent.
The SBV has decided to maintain the base rate – used by banks to fix their rates on loans and deposits – unchanged at 14 percent. This caps the lending rate at one and a half times, or 21 percent.
Last week, the bank also said on its website that a “tight monetary policy” will be pursued to keep prices in check.
Thanhnien
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