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Lending rates need to fall further, central bank told
Though the central bank has cut the base rate twice over the past month to reach the current 12% rate, capping commercial banks’ lending interest at 18%, businesses say it is still high and should come down further.
Commercial banks are allowed to set the interest rate on dong loans at a maximum of 50 percent above the benchmark rate, and businesses want it between 10 and 12 percent.
Annual dong lending interest rates have fallen to 18 percent from 21 percent, but businesses, especially private entrepreneurs, still find it hard to access bank loans, said Le Thi Tu Anh, vice chairwoman of the Young Businesspeople Association of Ho Chi Minh City at a meeting between city government, the central bank and businesses last week.
Anh said if a business wanted to invest in a project with bank loans at the current interest rate, it had to ensure the project would bring in profits at several percent higher, but this was really difficult in the current economic situation.
Nguyen Duc Hoan, chairman of the HCMC Garment, Textile, Embroidery and Knitting Association, said companies can only bear a 12-percent interest rate, and the central bank should provide more support so that commercial banks can cut their rates further.
Huynh Van Minh, general director of the Saigon Trading Group, said companies, especially those trading in agro-forestry-fishery products, were facing many difficulties due the central bank’s tightened monetary policy, which has been applied across the board, with no consideration given for specific sectors.
The HCMC Business Association said a majority of more than 4,000 association members had reached only 60-70 percent of their annual production target so far.
Minh said the government’s tightening of monetary policies to contain double-digit inflation had made it very hard for businesses to access bank loans.
“With the 18-percent interest rate, only property developers whose projects are underway will borrow money as others cannot invest in new real estate projects using bank loans,” said HCMC Real Estate Association Chairman Le Hoang Chau.
Chau proposed banks extend debt repayments and continue offering loans so that businesses can overcome difficulties.
As of September 30, total nonperforming debt stood at some VND35 trillion (US$2.1 billion), accounting for 2.92 percent of overall outstanding loans, said Deputy Governor of the State Bank of Vietnam Nguyen Dong Tien.
However, Tien said the local banking system is currently safe and there are no commercial banks in danger of becomeing insolvent.
In Hanoi and HCMC, the percentage of bad debts in real estate was lower than 2.5 percent.
Nguyen Van Giau, Governor of the State Bank of Vietnam, said loans worth VND14.3 trillion ($844 million) were approved this year for 151 real estate projects in HCMC. He said 56 of those projects had received loans while banks were disbursing money to the others.
Giau said the HCMC State Bank would soon consider real estate projects which were blocked from bank credit due to the monetary tightening.
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“With the 18- percent interest rate, only property developers whose projects are underway will borrow money as others cannot invest in new real estate projects using bank loans,”
HCMC REAL ESTATE ASSOCIATION CHAIRMAN
LE HOANG CHAU |
Ho Huu Hanh, director of the HCMC State Bank, said a survey at 97 banks showed 85 percent of nearly 18,000 applications were accepted last month.
The remainder were rejected mainly because they did not meet required conditions, had ineffective business plans or low capital capacity, said Hanh.
The HCMC State Bank’s figures showed outstanding loans to small and medium-sized companies totaled VND207.5 trillion ($12 billion), or 42 percent of the overall outstanding loans, in the first ten months of this year.
The central bank’s Giau said some companies were reluctant to ask for bank loans after the two recent key rate cuts because they were waiting for further reductions. He said the central bank may encourage banks to reduce deposit interest rates and therefore, cut lending rates in the near future.
The HCMC State Bank’s Hanh said banks’ deposit capital was now at around VND588 trillion ($34.7 billion), 15 percent up from early this year.
Do Hoang Anh Tuan, Deputy Finance Minister, said for electronics component production, agro-forestryfishery product processing, garmenttextile, and leather-footwear sectors, the government has allowed businesses who were earlier subjected to pay income tax in the third and fourth quarters of this year to delay their payment by six months.
The government was also seeking the National Assembly’s approval to apply income tax reduction or
exemption to three categories of businesses: businesses meeting too many financial difficulties, small and medium-sized businesses, and production companies employing more than 300 workers.
Thanh nien , TT
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