Saturday, 29/11/2008 13:47

Local firms bouncing back to demand loans

Local enterprises have been backed to source funds from banks following the State Bank screwing down lending rates further.

Pham Xuan Duc, of Hanoi Construction and Investment JSC, said his company reached an agreement with the Bank for Investment and Development of Vietnam (BIDV) to borrow a nine-month fund at 13 per cent per year, right after the State Bank’s softer policies were announced last week.

According to Decision 2809/QD-NHNN, the base interest rate has been trimmed 1 per cent to 11 per cent. The refinancing rate was cut accordingly to 12 per cent from 13 and the rediscount rate was lowered from 11 to 10 per cent. Starting last week, the maximum mobilising and lending interest rate which local banks were allowed to offer was down to 16.5 per cent per year, from 18 per cent previously.

Meanwhile, Decision 2811/QD-NHNN has lowered the reserve requirement for local credit institutions. The reserve requirement for commercial banks decreased from 10 to 8 per cent for deposits with terms less than 12 months and from 4 to 2 per cent for deposits with terms longer than 12 months. For the Bank for Agricultural and Rural Development (Agribank), the reserve requirement for deposits of less than 12 months was decreased from 7 to 5 per cent and over 12-month deposits from 3 to 1 per cent.

According to Nguyen Thanh Toai, Asia Commercial Bank’s (ACB) deputy general director, the bank started getting calls from enterprise directors who wanted to discuss borrowing funds right after the State Bank announcement last Thursday.

“This means enterprises have again found lending rates appropriate for borrowing funds, a thing that we did not see over the last few weeks,” said Toai. Lending activities have been almost frozen since August. The whole banking system has seen a less than 1 per cent credit growth, which brought the system’s temporary fund surplus up to VND50,000 billion ($3 billion) by late October.

Though lending interest rates have sunk sharply by 3-4 per cent over the last two months, local enterprises tended to wait until other monetary relaxations pave the way for local lenders to further cut their rates. Hoang Diem Thuy, the head of the Domestic Treasury Department for the Bank for Foreign Trade of Vietnam (Vietcombank), estimated that the lower reserve requirement had provided an additional VND20,000 billion ($1.2 billion) to the local banking sector.

With a lower reserve requirement, local banks now have to give the State Bank only $8 of required reserves for every $100 mobilised, instead of $10 previously. The additional funds have allowed local banks to lower their lending rates. Agribank and Vietcombank’s lowest lending rate has been cut to just 12 per cent, per year for prioritised customers – the lowest level so far. BIDV and other joint stock banks have lowered their lending rates an average of 1 per cent.

The Vietnam Steel Association’s general secretary Pham Chi Cuong said that a 13-14 per cent per year lending rate was quite acceptable for steel manufacturers. Nguyen Thi Kim Thanh, vice head of the State Bank’s Monetary Policy Department, forecasted that the banking system’s surplus would dry up in around four weeks as the borrowing demand surges.

“The year-end period is always a high time for borrowing. Thus, the fund surplus situation in the local banking system could quickly turn to a shortage. By then, the State Bank’s fund-injection activities would be back to the drawing board,” said Thanh.

VIR

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