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Businesses’ debt payments before maturation challenging banks
Enterprises that borrowed money from banks at high interest rates are now proposing to pay the debts before they mature in order to get new loans at lower rates. Banks have been pushed into an embarrassing situation with these proposals.
After the State Bank of Vietnam reduced the basic interest rate to 11%, commercial banks have slashed both their deposit and lending interest rates. The popular lending interest rates are between 13.5% and 16.5%, while the preferential rate offered by Vietcombank to some clients is now at 12% per annum.
Despite the lower lending interest rates, the disbursement has been going very slowly because banks still have high requirements for loans, while enterprises have been facing many difficulties in their business due to low purchasing power.
Businesses, nowadays, are thinking carefully before asking for loans, and they are only trying to get loans when really necessary. They are also carefully considering the loaning conditions and loan’s terms. Previously, businesses borrowed money with the interest rates fixed for at least three months, while they are now demanding monthly adjustments to the rates.
However, low disbursement is proving to not be the sole problem for banks at this time. A lot of clients have proposed to pay their debts before they mature in order to get new loans with lower interest rates, even accepting fines for this.
Some bankers told the press that the proposal for making payments before maturation has created difficulties for them, and that they are trying to negotiate with banks on adjusting the interest rates, while they will not accept the payment before maturation.
A representative from a joint-stock bank said that previously banks asked clients to pay fees (different for different banks) if clients demanded a disbursement for loans before schedule. However, banks have stopped collecting this kind of fee after the State Bank of Vietnam asked banks to stop collecting any additional fees for loans. The official said that now, as many clients want to pay debts before maturation; the bank is considering re-imposing that kind of fee.
The official also said that the bank’s branches have been continuously calling the headquarters recently to ask about how to deal with the payments before maturation. However, he said that the bank’s credit committee has not made any decisions about the fee, as it still wants to negotiate with clients on the interest rates that can be acceptable for both sides.
“Adjusting the lending interest rates instead of accepting payment before maturation is proving to be the choice of many banks, as this will benefit both the banks and the clients,” he said.
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